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Issue Brief: Certificate-of-Need Laws


October 30, 2018



Issue Brief: Certificate-of-Need Laws


What are Certificate-of-Need Laws?

Certificate-of-Need (CON) laws require healthcare providers to obtain government permission before they open or expand their practices or purchase certain devices or new technologies. The intent of these CON programs was to restrain health care facility costs and facilitate coordinated planning of new services and facility construction. These regulations were enacted under the assumption that excess capacity stemming from overbuilding of health care facilities results in health care price inflation, and therefore, restricting entry to the market would lower health care costs, increase availability of these services to the poor, and improve hospital quality.

Oklahoma’s CON Laws

Oklahoma currently has two CON laws that regulate five healthcare services. A breakdown of those laws is below.

Long-Term Care Certificate of Need

  • Intermediate Care Facilities for Individuals with Intellectual Disability (ICF/IDs)

  • Nursing Home Beds/Long-Term Care Beds

  • Hospital-Based Skilled Nursing Units (Subacute Services)

These facilities must be approved or exempted under Oklahoma’s Certificate of Need laws before they can establish a new facility, increase the number of beds at an existing facility, acquire ownership or operation of a facility, or spend $1,000,000 or more on any project.

Psychiatric and Chemical Dependency Treatment Facilities Certificate of Need

  • Psychiatric Services

  • Substance/Drug Abuse Services

This certificate of need law requires these treatment facilities to receive approval before establishing a new facility or transferring ownership or operation of a facility.

What Other States Have Done

Initially, all 50 states were required to have CON programs as part of the federal “Health Planning Resources Development Act” of 1974. Since the federal mandate was repealed in 1987, 14 states have discontinued their CON programs, with New Hampshire being the most recent to repeal in 2016. Currently, 36 states and the District of Columbia impose CON restrictions on the provision of healthcare. Indiana was the most recent state to enact legislation to establish a CON program, effective July 2018.

Con Law StatesAccording to a 2016 study by the Mercatus Center at George Mason University, there are 34 types of services regulated by CON laws. Oklahoma only regulates five of those services. Only four CON law states regulate fewer services. Those states include Nebraska (4), Louisiana (3), Ohio (1), and Arizona (1).

As of 2016, 33 states and the District of Columbia regulate nursing home beds/long-term care beds, which makes it the most regulated healthcare service by CON laws. The table below provides a breakdown of the number of states that regulate the same services as Oklahoma via CON laws.

 

Regulated Services
State Count
Intermediate Care Facilities for Individuals with Intellectual Disability 28
Nursing Home Beds/Long-Term Care Beds 33
Psychiatric Services 28
Subacute Services 13
Substance/Drug Abuse 24

States with CON Laws Compared to States without CON Laws

In a 2017 study by the Mercatus Center, the authors compare outcomes in states that have CON laws with outcomes in those that do not. These comparisons account for socioeconomic differences and differences in the underlying health of the populations across states. The study looks at healthcare spending, access, and quality. Some of the main findings for Oklahoma are as follows:

  • CON laws are associated with higher healthcare spending per capita and higher physician spending per capita. If Oklahoma didn’t have a CON law, total annual per capita healthcare spending would decrease $206, and annual per capita physician spending would decrease $72.

  • Research shows that the presence of a CON program is associated with fewer rural hospitals and fewer total hospitals (rural and nonrural). If Oklahoma didn’t have a CON law, the number of total hospitals in our state would increase by 65 and the number of rural hospitals would increase by 35.

  • Research finds that mortality rates for pneumonia, heart failure, and heart attacks, as well as patient deaths from serious complications after surgery, are statistically significantly higher in hospitals in states with at least one CON regulation. If Oklahoma didn’t have a CON law, the mortality rate for pneumonia would decrease 0.7%, and the number of patient deaths from post-surgery complications would decrease 5.0%.

 

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Issue Brief: Certificate-of-Need Laws | Issues