Medical Cronyism

Certificates of need

In 36 states and the District of Columbia, health care providers must obtain what's known as a "certificate of need" (CON) in order to open up new facilities. Ostensibly, these certificates are intended to ensure that patients have sufficient access to providers and services, especially in less populated parts of the country. In practice, they mean that providers hoping to enter a new market or expand their offerings must get permission from their competitors, who often already sit on local licensing boards. It's a mechanism for suppressing new health care businesses, not for ensuring patient access.

A March report from the Mercatus Center points out that states with CON requirements have, on average, about 30 percent fewer hospitals per capita, averaging about 2.65 hospitals for every 100,000 residents. (States with no such laws have about 3.75.) The difference is clear even when narrowing the focus: CON states also have about 30 percent fewer rural hospitals. And other providers, such as ambulatory surgical centers? CON states have 14 percent fewer of those as well.

As the authors conclude, "CON programs do not promote access to rural care." In fact, they do the opposite, enabling anti-competitive behavior by health care incumbents while leaving patients with fewer options.