Give Rural Residents More Healthcare Choices

CON laws are associated with 30 percent fewer rural hospitals

By David Herbst

Imagine you are a fishing rod manufacturer. You have spent years learning how to craft high-quality, light-weight rods and now want to start selling your goods. However, the moment you open your shop a government official drops by and gives you a notice: before you start selling you must apply for permission from a panel of bureaucrats and representatives from the big sporting goods store down the street. They expect you to demonstrate an ambiguous “need” prior to granting you permission to open for business.

Replace “fishing rods” with “basic healthcare,” and that’s just what many doctors face in Montana, thanks to our monopolistic “Certificate of Need” (CON) laws.

A recent study from the non-partisan Mercatus Center explains how CON laws across the country hamper access to affordable healthcare services – particularly in rural communities. CON laws are associated with 30 percent fewer rural hospitals and 13 percent fewer rural ambulatory surgical services per 100,000 rural residents. Less hospitals and ambulatory surgical services means Montanans have less options for routine medical procedures.

CON laws put industry planners ahead of the needs of the community by requiring doctors and other health care providers to demonstrate “need” and obtain approval from bureaucrats and special interests prior to building new facilities and providing new services.

CON laws were first introduced to big hospitals and nursing homes in New York in 1964. When existing hospitals began to realize the financial benefit from this kind of monopoly protection, the American Hospital Association began a national lobbying campaign to pass CON programs in other states. Montana followed suit in 1975.

In Montana, CON laws regulate the number of outpatient centers for ambulatory surgical services (ASCs) for counties with a population of 20,000 or less, hitting rural areas the hardest. Home health agency services, inpatient chemical dependency facilities, intermediate care facilities for persons with mental disabilities, and nursing homes are also subject to these artificial and unneeded restrictions.

The loss of rural hospitals and other medical facilities means less competition, reduced access to care, and higher prices. That’s why even the federal government recommends scrapping these laws. In 2004, the Federal Trade Commission (FTC) and the Department of Justice both claimed that CON programs actually contribute to rising prices because they inhibit competitive markets. States such as Florida, Virginia, and North Carolina have already begun working to free patients from many of their CON laws. Besides increasing access to care, these reforms will encourage greater economic growth in their respective economies as more medical providers are able to enter the market.

The Institute for Justice (IJ) found that CON laws substantially discourage interstate commerce. In particular, IJ pointed to Virginia’s CON laws, which prevents $100 million of medical imaging equipment from being imported.

Whether you are trying to sell fishing rods or outpatient x-rays, established monopolies should not hamper your freedom to provide valuable services. Our next legislature and governor should pass Certificate of Need reforms that roll back these restrictions and increase access to affordable healthcare.

David Herbst, state director
Americans for Prosperity

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