Microhospitals Booming-But Not in Missouri, Thanks to Certificate of Need

Posted on by Patrick Ishmael

We often preach that boosting the supply of health care services is a necessary component of any serious and significant health care reform. Indeed, we published a whole paper about its importance last month. And along with licensure reform—to which most of that paper was devoted—doing away with the Missouri's Certificate of Need (CON) laws for hospitals would be a huge supply-side reform and victory for the state's patients. 

CON laws limit where many health care facilities can open in Missouri, effectively carving out monopolies and oligopolies for incumbent providers. Sometimes the negative consequences of CON aren't obvious to patients because new providers don't even bother entering a CON health care market, so customers never see what they aren't getting. But for patients here in the Kansas City area, the difference between a CON state like Missouri and a non-CON state like Kansas is becoming a lot clearer as new, smaller health care operations are exploding in Kansas—but not here in Missouri.

It’s the overnight beds that make micro hospitals different from free-standing ERs rooms that HCA Midwest Health and Shawnee Mission Health introduced years ago to the area.
 
The overnight beds also help explain why the micro hospital burst in the area will be concentrated in Kansas rather than Missouri.
 
To add overnight beds in Missouri, hospitals must prove the greater bed capacity is needed by going through an expensive and lengthy Certificate of Need process with the state.
 
Around the country, micros are blooming in Colorado, Texas, Nevada and Arizona—states like Kansas that don’t require Certificates of Need.
 
Other industries have their own versions of CON where the anti-competitive nature of such laws is arguably more overt, like in the case of movers. As the Pacific Legal Foundation observed,
 
…most states have laws like these—called Certificate of Public Convenience and Necessity or Certificate of Need laws—covering a variety of industries, including railroads; gas pipelines; limousine and taxi companies; ambulances; buses; and, of course, moving companies. By my count, 23 states now have these “CON Laws” on the books when it comes to moving companies.
 
Fortunately, the landscape for such legislation is turning decidedly negative. Four years ago, Missouri repealed its CON law for movers; it should do the same with hospitals in 2017. If Missouri doesn't, other states will benefit from our state legislators' inaction, and Missouri patients will continue to be disadvantaged for it.
 
 

Well, At Least It’s Not a Check

Posted on by Michael Highsmith

In a perfect world, municipalities would not need to offer tax incentives to attract investment. That was the consensus on November 15 at the Clayton Board of Aldermen’s meeting concerning Centene’s proposal for $75.6 million in tax abatement over the next 20 years. Unfortunately, policymakers don’t see us as living in a perfect world. They argue that if the city needs to forego a few million in revenues that would otherwise help pay for municipal services, so be it.

Before the board voted unanimously in favor of subsidization, each member gave a brief speech explaining his or her decision. The majority opinion was that tax incentives are not ideal, but that Missouri’s current economic environment demands them. Tax incentives for large projects like Centene’s have become the norm, so withholding the expected tax breaks means running the risk of losing investment to other regions.

But “we’ve always done it that way” is a dangerous line of reasoning when past decisions have negatively impacted cities, and the research shows that economic development subsidies are often used unnecessarily. They have little positive impact on the region’s economy, perhaps because they divert revenues away from crucial municipal services like schools. This is hardly a pattern we should aim to continue.

Clayton’s office vacancy rate is half that of St. Louis City, and Clayton is hardly lacking investors. This, along with the fact that last year Centene placed 4th on Fortune’s list of the nation’s fastest-growing companies, calls the need for subsidies for Centene into question.

Clayton officials justified the use of incentives by saying that no physical checks are written to Centene. If the city doesn’t give any money to the development, then they are not losing out. This reasoning fails to account for the millions of dollars in lost revenue from taxes that will go to the developer instead of into the city’s tax base.

It’s disappointing that the board felt, despite their distaste for tax incentives, that today’ market environment demands subsidization. Cases like this remind us of the need for reforms that can help create a more growth-friendly environment in the Saint Louis region and across Missouri.

We Are Thankful for Citizen Petitioners

Posted on by Patrick Tuohey

The recent past has been a busy time for citizen petitioners in Kansas City. Current and recent efforts have included an audit of the water department, an expensive light rail system, and an increase in the minimum wage. Some have been successful, such as that requiring a public vote on any changes to the airport or a challenge to a crossroads tax increment financing effort, and some—such as a challenge to a proposed convention hotel—have failed. But all are signs of a healthy democracy.

In 2011, we published:

One of the greatest strengths of American government is that there are a number of checks and balances at the federal, state, and local levels that limit the ability of any one branch of government to abuse its power. The initiative petition process is one of those checks on power, and restricting it further will serve only to erode Missourians’ ability to limit legislators by initiating good—but politically difficult—policy change.

This remains as true today as ever. And while we may not always agree with the goals of the petitions—as is the case with efforts to increase the minimum wage in Kansas City—we respect citizens exercising their rights. And we are thankful that people still care enough about public policy to roll up their sleeves and get involved in ways that go beyond simply casting the occasional ballot.

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging