Warren Anderson, Mackinac Center for Public Policy
Certificate of Need laws correlate with higher costs and “do not achieve their purpose,” according to a comprehensive new survey.
These laws, which require medical providers to get approval from the state in order to expand certain services, decreased access to medical care in 80% of case studies. Though supporters claim CON laws ensure access to medical care, only 7% of studies suggested a positive link.
In a new, comprehensive review of economic research. Matthew Mitchell of West Virginia University reviewed 128 academic papers on the impact of CON laws. “The accumulated evidence is overwhelming that CON laws do not achieve their purpose,” Mitchell concluded.
The scope of the study casts doubt on claims made by CON law proponents. In states that have these laws, hospitals that want to add more beds must first get the approval of a government committee. Many committee members represent the interests of existing medical providers, and CON laws can be used to limit competition in the industry.
“The goal of Michigan’s CON program is to protect healthcare customers from excess or low-quality healthcare services and the costs associated with them,” according to the Michigan Health and Hospital Association, an interest group that lobbies on behalf of hospitals and other medical providers. The association says Michigan’s CON program “ensures only needed services are developed in Michigan,” helping provide “high-quality, accessible, cost-effective care for patients in our state.”
Mitchell identified about 450 statistical tests on the efficacy of CON laws in “reducing spending, increasing access, enhancing quality, and encouraging care for underserved populations.” The paper goes through each of the four categories advocated by CON proponents to see what the economic research says about the observed effects of these laws.
There are multiple ways to measure the impact of CON laws on spending. Mitchell analyzed three different methods. No matter the measure, more research shows that CON laws are associated with higher spending than that they reduce costs. This fits with standard economic theory, as the program artificially reduces the supply of health care, which means the price of these services will be higher.
Mitchell evaluated 83 tests from dozens of studies of CON laws’ impact on accessibility. Nearly 80% of the research finds that CON laws decrease the availability of medical services. Just 7% find a positive association, with the rest of the results being statistically insignificant.
Certificate of Need laws also do not enhance the quality of service. Of more than 100 tests for quality, just under half found CON laws decrease the quality of service. Only 15% of studies found that CON laws improved quality. But for every one of those studies, there were three others suggesting the opposite.
The starkest finding relates to underserved populations, such as rural areas with fewer doctors and medical providers. Out of 17 tests, 14 found that CON laws decrease provision of service to underserved populations, three find no effect and zero find a positive effect.
The Michigan Health and Hospital Association notes on its website that some studies show benefits from CON laws. That is true. But these studies are significantly outnumbered — three or four times over, in some cases — by those that find negative effects. The weight of the evidence shows that CON laws have negative impacts on health in the aggregate.
During the early days of the Covid-19 pandemic, Gov. Gretchen Whitmer suspended some of Michigan’s CON laws as an emergency measure. If these policies really helped improve health outcomes, it seems they would have been strengthened in a time of crisis, not abandoned. As shown by a meticulous meta-analysis of the economic research on their impact, CON laws are not needed to improve health outcomes. It’s more likely they have the opposite effect. To improve health access and quality in Michigan, a simple fix would be to eliminate the state’s CON laws, as other states have done.
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Warren Anderson is an associate professor of economics at the University of Michigan-Dearborn, where he’s taught since 2011.
These laws, which require medical providers to get approval from the state in order to expand certain services, decreased access to medical care in 80% of case studies. Though supporters claim CON laws ensure access to medical care, only 7% of studies suggested a positive link.
In a new, comprehensive review of economic research. Matthew Mitchell of West Virginia University reviewed 128 academic papers on the impact of CON laws. “The accumulated evidence is overwhelming that CON laws do not achieve their purpose,” Mitchell concluded.
The scope of the study casts doubt on claims made by CON law proponents. In states that have these laws, hospitals that want to add more beds must first get the approval of a government committee. Many committee members represent the interests of existing medical providers, and CON laws can be used to limit competition in the industry.
“The goal of Michigan’s CON program is to protect healthcare customers from excess or low-quality healthcare services and the costs associated with them,” according to the Michigan Health and Hospital Association, an interest group that lobbies on behalf of hospitals and other medical providers. The association says Michigan’s CON program “ensures only needed services are developed in Michigan,” helping provide “high-quality, accessible, cost-effective care for patients in our state.”
Mitchell identified about 450 statistical tests on the efficacy of CON laws in “reducing spending, increasing access, enhancing quality, and encouraging care for underserved populations.” The paper goes through each of the four categories advocated by CON proponents to see what the economic research says about the observed effects of these laws.
There are multiple ways to measure the impact of CON laws on spending. Mitchell analyzed three different methods. No matter the measure, more research shows that CON laws are associated with higher spending than that they reduce costs. This fits with standard economic theory, as the program artificially reduces the supply of health care, which means the price of these services will be higher.
Mitchell evaluated 83 tests from dozens of studies of CON laws’ impact on accessibility. Nearly 80% of the research finds that CON laws decrease the availability of medical services. Just 7% find a positive association, with the rest of the results being statistically insignificant.
Certificate of Need laws also do not enhance the quality of service. Of more than 100 tests for quality, just under half found CON laws decrease the quality of service. Only 15% of studies found that CON laws improved quality. But for every one of those studies, there were three others suggesting the opposite.
The starkest finding relates to underserved populations, such as rural areas with fewer doctors and medical providers. Out of 17 tests, 14 found that CON laws decrease provision of service to underserved populations, three find no effect and zero find a positive effect.
The Michigan Health and Hospital Association notes on its website that some studies show benefits from CON laws. That is true. But these studies are significantly outnumbered — three or four times over, in some cases — by those that find negative effects. The weight of the evidence shows that CON laws have negative impacts on health in the aggregate.
During the early days of the Covid-19 pandemic, Gov. Gretchen Whitmer suspended some of Michigan’s CON laws as an emergency measure. If these policies really helped improve health outcomes, it seems they would have been strengthened in a time of crisis, not abandoned. As shown by a meticulous meta-analysis of the economic research on their impact, CON laws are not needed to improve health outcomes. It’s more likely they have the opposite effect. To improve health access and quality in Michigan, a simple fix would be to eliminate the state’s CON laws, as other states have done.
—————
Warren Anderson is an associate professor of economics at the University of Michigan-Dearborn, where he’s taught since 2011.
