Cutting through the CONfusion: Movement to relax the limits
■ Certificate-of-need laws still apply in the majority of states, and some have extended their reach beyond typical hospital services. With the AMA and the FTC questioning the effectiveness of CON laws, some states are taking another look at their programs.
By Mike Norbut — Posted Feb. 7, 2005
In Alabama, you have to prove that a need exists before you can purchase an ultrasound machine for your office.
In 13 states, including Maine, if you want to offer renal dialysis services, you must get state approval. Connecticut regulates some business computer purchases, and Washington, D.C., needs to approve the construction of your medical office building.
These requirements all come courtesy of certificate-of-need laws, commonly called CON laws. They were created to regulate health care spending, particularly for hospitals.
But in some states, the net has been cast more widely. Thirty-six states plus Washington, D.C., have CON laws, and each state varies according to what's regulated and the economic thresholds that, if surpassed, would require state review of projects.
The AMA long has opposed CON laws on grounds that there is little evidence to suggest that regulations effectively rein in health care costs. But at the Interim Meeting in December 2004, AMA delegates took a more aggressive stance. They voted to oppose federal CON legislation, oppose the expansion of CON laws in some states and support state medical groups that are working to get some laws repealed.
Critics of CON laws have noted that hospitals are among those who have lobbied in some states to extend laws to physician-owned facilities, such as specialty hospitals, ambulatory care centers and diagnostic imaging facilities.
"Hospitals are crying foul that physicians own these facilities, but the concern we have is what's best for our patients," said AMA President John C. Nelson, MD, MPH. "Competition is the way to go."
The AMA is not the only dissenting voice. A report last year by the U.S. Federal Trade Commission concluded that CON programs on the whole "are not successful in containing health care costs," and "they pose serious anticompetitive risks that usually outweigh their purported economic benefits."
The FTC report has stirred debate and created tension among state regulators, but the resulting actions have been mixed, said Tom Piper, director of the Missouri Certificate of Need program and president-elect of the American Health Planning Assn., which is supportive of CON laws.
For example, while Florida is looking at ways to loosen its rules, states such as Alaska and Maine recently have strengthened theirs, Piper said.
"Across the country, we are seeing a rising debate between physician groups and hospital groups, not the least of which is about specialty hospitals," Piper said.
The AHPA criticized the FTC's conclusions about CON laws in its own report released in December 2004. The report said the agency "repackages and restates decades-old arguments against regulation" without offering any new evidence to support its claims. The AHPA report also maintains that certificate-of-need laws are effective balancing tools -- they can promote competition, and their use can result in economic and quality benefits.
"CON regulation is the most reliable and practicable tool for implementing service, institutional and regional planning policies and practices that facilitate and ensure appropriately high program volumes," the report states.
CON laws, however, cover more than 30 different categories of health services. Alaska regulates the greatest number of services at 26, while Ohio regulates only one service, and Oregon, Nebraska and Louisiana track only two categories, according to statistics compiled by Piper.
Long-term care is regulated by every state, mainly because it's easiest to illustrate financial impact by analyzing government subsidy programs, Piper said. The lack of a consistent reporting method for all services, however, explains why 20 states regulate MRI scanners while only five regulate ultrasound machines.
"It's easier to measure what happens in hospitals because of the traditional reporting that's in place," Piper said. "But there's very little reporting from freestanding settings."
The idea of data reporting, of course, opens up its own trunk full of questions, but Piper said good reporting systems would help physicians and others down the line. With occupancy and utilization data, he said, physicians could streamline their own business plans or decide if an investment is even worth pursuing.
"Better certificate-of-need laws can be defined as more efficient," said Piper, who added that in his home state of Missouri, officials reviewed CON laws about five years ago in the interest of making the laws work better. They ended up loosening some laws and creating an expedited review process, he said.
From the AMA's perspective, though, even revamped CON laws are hardly models of efficiency.
"If you look at the evidence, they don't seem to do anything but get in the way politically," Dr. Nelson said. "It's one more regulatory hassle."