Learning from the pandemic: It’s time for states to permanently suspend certificate-of-need laws

“Our volume is just exploding,” stressed Dr. Erik Blutinger, a doctor at Mount Sinai Queens Hospital in New York. “We have so many people in the hallways that are all COVID positive.”

In a powerful video, Dr. Blutinger offered a glimpse into a New York hospital during the peak of the pandemic last year. In what was a similar experience for many healthcare providers in New York during the beginning of the coronavirus, there were too many patients to treat, and not enough beds to treat them. The state’s hospitals were overwhelmed. New York faced a shortage of hospital beds, ventilators, and surgical masks.

But this problem was not unique to New York—Louisiana and Washington were also early coronavirus hotspots. They faced similar capacity problems. There weren’t enough beds or equipment to treat the record number of coronavirus patients.

Why was our healthcare system so ill-prepared to handle the influx of coronavirus patients? And why was there a severe shortage of hospital beds in particular? An obscure policy called certificate-of-need is a big reason why hospitals faced these overwhelming challenges.

What are certificate-of-need laws?

Certificate-of-need (CON) laws are regulations that require healthcare providers to get special permission from the government before adding or expanding healthcare services or facilities. For example, if a hospital in New York wanted to add beds to their facility, they would first have to get approval from a state regulatory board. That hospital would have to prove it needs the bed—hence the name “certificate-of-need.”

Today, 35 states and the District of Columbia have CON laws in place. States have CON requirements for different types of healthcare services. For example, in Michigan, there are 19 services that require a certificate-of-need, including hospital beds, magnetic resonance imaging scanners, and open-heart surgery. Nevada, on the other hand, only has three services that require a CON: air ambulance, new hospitals, and psychiatric services. Hawaii has the highest number of CON requirements of any state—regulating 28 services.

First introduced in the 1970s, CON laws were intended to control healthcare costs and access to healthcare. But decades of research has shown CON laws have actually done the opposite.

For years, healthcare economists, researchers, and policymakers have highlighted how CON laws reduce access to healthcare while increasing costs. But it wasn’t until the pandemic hit that people realized just how problematic these laws are.

States across the country suspend CON laws to expand healthcare capacity

At the onset of the coronavirus, a 50-state Network of policy organizations encouraged states to suspend their CON laws so healthcare providers would have the resources they needed to fight the pandemic. Twenty-four states—regardless of what political party was in power—took their advice.

Which brings us back to New York. The governor suspended the state’s certificate-of-need laws on March 20, 2021. This directive enabled hospitals such as Mount Sinai in Queens to expand their capacity without getting permission from the government first. Healthcare providers converted tennis courts, a racetrack, and even Central Park into makeshift hospitals. Hospitals were also allowed to purchase needed medical equipment, including ventilators, without applying for a certificate-of-need. By suspending CON laws, states allowed our healthcare system to better serve those in need.

The Network encourages states to repeal CON laws permanently

State think tanks across the country are working to make the temporary suspension of CON laws permanent. After all, if you suspended the regulation in a time of crisis, why did you need the regulation to begin with? Good policy during a pandemic is good policy outside a pandemic as well.

All Americans deserve affordable access to high-quality healthcare, and providers should be trusted to add the facilities and supplies they need to administer care on a daily basis or in the midst of a public health emergency. That’s why this Network is encouraging states to lift burdensome CON requirements. Several states are taking note:

The Alabama Legislature introduced a bill to repeal the state’s CON program altogether. At the beginning of the 2021 legislative session, the Alabama Policy Institute encouraged legislators to eliminate the certificate-of-need process.

Alaska is considering legislation to repeal its certificate-of-need laws. The Alaska Policy Forum noted repeal of CON is in the best interest of patients across Alaska and the country as a whole.

The Hawaii Legislature is considering legislation that would exempt special treatment facilities, psychiatric services, and chronic renal dialysis services from Hawaii’s certificate-of-need requirements. The Grassroot Institute of Hawaii submitted testimony on this bill and noted it would take an important step toward addressing Hawaii’s ongoing difficulties with healthcare affordability and access.

Maine is considering eliminating its entire certificate-of-need program. The Maine Policy Institute encouraged lawmakers to end CON requirements in the 2021 legislative session.

Lawmakers in Michigan introduced legislation that would limit the state’s certificate-of-need program. The Mackinac Center encouraged the state to make the temporary suspension of CON laws permanent. Mackinac argued doing so will help Michigan respond to future emergencies and provide more access to affordable care under normal circumstances.

Montana is considering a bill that repeals its CON program. The legislation follows recommendations from the Frontier Institute.

North Carolina, a state with the third most restrictive CON program in the country, is considering a bill that would reform the state’s certificate-of-need laws. The John Locke Foundation has been working to repeal these harmful laws, and released a paper in March 2021 on the implications of CON laws in North Carolina.

South Carolina is considering repealing certificate-of-need laws. The Palmetto Promise Institute has been encouraging lawmakers to repeal the state’s CON program.

Case Study: The James Madison Institute helps remove CON laws in Florida

Florida was the most recent state to repeal significant portions of its certificate-of-need program. The Sunshine State removed CONs for general hospitals, complex medical rehabilitation beds, and tertiary hospital services in 2019. The state still has CON requirements for ambulances, nursing homes, and hospices—among other services—but policymakers repealed the majority of the state’s CON requirements.

The James Madison Institute, a policy organization in Tallahassee, Florida, helped the state remove significant portions of its CON program. Through a multiyear campaign, the Institute educated policymakers and the public on the effects of CON laws.

The Institute noted overcoming the entrenched interests of existing healthcare providers was a significant challenge in their efforts to repeal Florida’s CON laws. Existing providers like certificate-of-need laws because it prevents competitors from entering the market. A lack of awareness among the public was another hurdle—most people have never heard of CON laws, let alone understand how they work. Sal Nuzzo, vice president of policy at The James Madison Institute, added:

“The medical industrial complex is entrenched and heavily funded—and they wield their influence as much as they can. But the educational gap on the folks that we work with in communities, the fact that they just didn’t know that these laws existed, and needed it explained to them, that was another challenge. Those two things served one another—the fact that there was a lack of statewide knowledge about this program allowed the medical complex to exert their influence. They were the only ones who could speak to it at that point.”

Despite these challenges, the Institute persisted. They were determined to remove these laws so Florida residents could have access to better healthcare at lower costs. Through policy research, op-eds, events, and other outreach, the organization continued to explain to their members what certificate-of-need laws are and how they hurt American families. The Institute’s efforts paid off in June 2019, when the Florida Legislature adopted legislation that repealed the majority of the state’s CON requirements.

After Florida reformed its CON program, several cities, including Palm Coast, Florida, announced they were building new hospitals. Five hospitals said they were getting ready to add high-end services, including transplants. These hospitals were previously unable to do so because of the state’s certificate-of-need laws.

Advice for state think tanks working on certificate-of-need reform: Use stories and build coalitions

The James Madison Institute shared advice for other state organizations working to repeal these burdensome regulations.

First, the Institute encouraged others to use stories to illustrate how these laws restrict access to healthcare and increase costs. For example, the Institute shared a powerful story of a Florida city that was unable to build a new hospital because another competitor vetoed their CON request.

Second, the Institute recommended state organizations work with coalitions in their state. JMI worked with Americans for Prosperity and the Institute of Justice throughout their campaign to repeal Florida’s certificate-of-need laws.

Finally, the Institute encouraged other state think tanks to have patience. Nuzzo added: “Don’t think that because it didn’t succeed in one legislative session that you should just abandon your efforts. In almost all scenarios in all states, it’s going to be a multiyear effort to educate, to build support, and to ultimately get it across the finish line.”