Show Me Better (Part 4): Certificate Of Need And Market Power
How far are you from the nearest hospital? Maybe you wonder why there is a single mega-hospital 10 miles away but aren’t any smaller ones nearby. Part of the explanation may be certificate of need (CON) regulations.
A 2004 report by the U.S. Department of Justice and Federal Trade Commission found that CON programs “pose serious anticompetitive risks that usually outweigh their purported economic benefits.” So far, I have written about how CON regulations can limit access to care and have been shown to not effectively control costs. CON regulations have the potential to stifle competition and grant existing hospitals monopolies over certain regions. Some existing hospitals may even attempt to use these regulations to prevent competition from entering the market.
How does this play out in Missouri?
In the past, any time a new hospital wanted to open up in Missouri, it had to apply for a CON – irrespective of its size and cost. A revision to Missouri’s CON rules changed the criteria for review from every new hospital to every new hospital whose cost is at least $1 million.
In April 2010, Patients First Community Hospital expressed its intent to build a small hospital in Saint Louis County that did not meet the new threshold for certificate of need review. Shortly thereafter, a regional rival, St. John’s Mercy Health System, filed a lawsuit against the Missouri Health Facilities Review Committee and Patients First. St. John’s challenged the legitimacy of the new $1 million amendment and construction of the new hospital. In 2012, the Missouri Supreme Court ruled that the new criteria for review was perfectly legal, thus giving Patient’s First the green light for the project.
Despite the ruling against St. John’s, this is an excellent example of a hospital using the legal system in an attempt to stomp out the competition, all under the pretense of CON regulation. It took about two years for Patients First to have its plan approved. These sorts of delays can deprive patients of new, much-needed medical facilities.
The state should not allow such an environment to exist.