Debate over Alabama’s certificate of need (CON) laws came to the forefront with the release of a recent study by the Alabama Policy Institute (API) that calls the laws “a bureaucratic hindrance to a dynamic 21st-century health system.”
Roy Cordato, vice president for research and a resident scholar with the John Locke Foundation in North Carolina, is author of the report, “Certificate of Need Laws: Why It’s Time for Repeal.”
The CON laws, enacted in Alabama in 1977, are an outgrowth of the National Health Planning and Development Act that was passed by Congress in 1974. Each state then was required to establish and administer CON regulations as a part of the health planning process. However, 10 years later, the federal government withdrew the requirement when it realized that the regulations did not actually lower or stabilize health costs. Since then, 13 states have repealed their CON laws and several others have reshaped their initial regulations.
Efficiency or Formalities?
Michael Ciamarra, API vice president of legislative affairs, believes that Alabama residents will receive medical care more efficiently and quickly if the CON restrictions are scaled back.
The process for obtaining a certificate of need in Alabama can take from 90 days to more than two years. “If a denial is appealed to the state Court of Appeals, the process can go well beyond two years,” stated Cordato.
Realistically, according to Alva Lambert, executive director of the Alabama Health Planning and Development Agency, which moderates the state’s CON laws, “The CON law was not a comprehensive piece of legislation, initially. The agency has tried to be consistent with rules and regulations; however, there is different case law from one jurisdiction to another.”
Competition or Monopoly?
Cordato said in his report, “It is competition that makes the consumers in the marketplace better off. Competition brings lower prices, more conveniences, better quality, new technologies and innovations, and so on.”
According to the National Conference of State Legislatures, CON laws are designed to control healthcare costs and ensure efficient planning of new services and construction. However, CON opponents nationwide say that certificate of need is a barrier to the marketplace and a hindrance to patient care.
Proponents of the laws say that for the CON laws to be repealed there would need to be a purely classical free market. This, according to Lambert, can never exist because of the nature of medicine. “Consumers don’t shop around for medical procedures; they agree to a procedure at a certain facility because that is where their doctor practices,” he said. “For many reasons, medicine can never be a purely market-driven situation.”
Patient Care or Government Bureaucracy?
CON programs are intended to limit healthcare spending and direct taxpayer money where funds will be used most effectively. Ideally, as the government monitors the distribution of healthcare, it will evaluate and assess needs of underserved communities in all demographic areas.
Nevertheless, Michael Morrisey, professor of health economics at the UAB School of Public Health, pointed out in his introduction to Cordato’s report, “One need look no further than the burgeoning Highway 280 corridor in Birmingham or the growth in Madison County near Huntsville to appreciate that many people in increasingly congested areas of the state now have longer travel time to get to a hospital. In both communities, existing hospitals (and new providers) would almost certainly be willing to build in the growth corridor. Much of what stops them is the CON process.”
Moreover, research indicates that CON laws often keep the price of healthcare and profits to providers inflated with the expectation that the excess dollars will be used to provide free care to the indigent, a practice that Cordato says resembles a hidden tax. “If a social and political goal is to see to it that those who cannot afford healthcare have their needs taken care of, then the costs of that policy should be upfront and explicit,” said Cordato.
What Is Ahead for Alabama’s CON laws?
The debate over CON laws has been lengthy in many states, including neighboring Georgia where the issue came before their state legislature last year and resulted in a deadlock with no action taken.
Although Lambert acquiesced, “There is always room to review and improve in any agency or government function,” the legislative process for repealing the laws may become as lengthy as petitioning for a certificate of need.
To read Cordato’s report, go to http://www.alabamapolicy.org/pdf/certificate_of_need.pdf.
March 2008
