Introduction
For several years now there has been a movement in Kentucky and other states to repeal certificate of need (CON) laws. According to the National Conference of State Legislatures, certificates of need “are state regulatory mechanisms for approving major capital expenditures and projects for certain health care facilities”. Healthcare businesses must apply for and receive a certificate of need from the state government before they can operate or expand. Arguments against the laws often rely on economic principles, such as competition, to justify their repeal. However, there is a gap in the discussion as it relates to the ethics surrounding the laws. Not only are CON laws associated with lower quality healthcare across several parameters, but they also operate under a narrow concept of health that fails to account for the full range of patient needs.
A Look at the Data
CON laws can easily be shown to reduce access to healthcare across at least two important categories: availability and utilization . Before diving into the numbers, it might be useful to explain why this is. The most straightforward answer is simply that this is what the policies were designed to do.
To understand why federal and state legislators would wish to limit their constituents’ access to healthcare, we have to go back to the 1960’s and examine what healthcare policy used to look like. Back then, the government and other payers reimbursed providers for care primarily using a “cost-plus” reimbursement system. Under the cost-plus regimen, healthcare facilities were reimbursed in full for any expenses incurred in providing care. Thus, legal expert Grace Bogart argues, “cost-plus reimbursement gave no external incentive to healthcare facilities to engage in efficient spending habits because no matter the cost of services offered, the facility would be reimbursed.” CON laws were meant to curb the inefficient spending the cost-plus model encouraged. At the time, policymakers thought that they could cut healthcare spending by regulating how many facilities there were. CON laws would do this by requiring government approval before any expansion or opening of facilities. The reasoning behind this was that if the government controlled when and if a facility could be built or expanded, then unnecessary healthcare costs caused by providing new services could be avoided.
The cost-plus model is no longer the dominant form of reimbursement in the United States. Providers are now reimbursed under a fee-for-service model, which sets near-universal prices for services without accounting for a provider’s expenses. This shift eliminates the concern for inefficient t spending that motivated CON laws in the first place. Now, decades since their inception, “the majority of studies fail to establish any definitive link between CON laws and lower unit costs,” according to former Federal Trade Commission commissioner Maureen Ohlhausen. In fact, Congress repealed an act that mandated states employ certificates of need after the Department of Justice and the FTC concluded that the policies “drive up costs, reduce quality, and limit the availability of needed services.” This was all the way back in 1986.
In their “Striving for Better Care: A Review of Kentucky’s Certificate of Need Laws” Jaimie Cavangauh, a former Institute for Justice attorney who has been involved in CON cases and Matthew Mitchell, a research fellow at West Virginia University who specializes in the matter, provide a comprehensive analysis of the academic literature surrounding the relationships between CON laws and various healthcare metrics. The authors examined 423 tests across 128 peer-reviewed government and academic publications on CON laws. Their results reconfirm the findings of the DOJ and FTC. After exhaustive analysis, they found that of the nearly 170 studies specifically examining the relationship between CON laws and access, 153 have found that “CON laws impede access to care or have a neutral or insignificant effect on access.” They divided measures of access into two categories: availability and utilization. When it came to availability, which they defined as “how easy it is for patients to obtain care,” they found that 79% of tests associated CON laws with reduced availability. Only 8% suggested the laws were associated with increased availability.
The other half of Cavangauh and Mitchell’s analysis focused on how services were being utilized, with just 12% of tests connecting CON laws with increased utilization and nearly twice as many suggesting a decrease. Cavanaugh and Mitchell also found CON laws to be associated with a poorer quality of care and increased healthcare spending. It is clear from their analysis that CON laws are associated with worsened healthcare across multiple metrics.
Despite this data, proponents of CON laws often claim that they protect “safety-net hospitals.” The term “safety-net hospital” is difficult to define, but it generally is used to refer to hospitals serving a high proportion of Medicaid or low-income individuals as part of their patient population . In 2007, however, when the State of Illinois was considering repealing its own CON laws, its Commission on Government Forecasting and Accountability requested that the Lewin Group, a consulting firm with a focus on healthcare policy, evaluate the laws. The report found that safety-net hospitals operating in states with CON laws actually tend to have profit margins “2.6 percent” lower than those in states without them. In fact, they found that on aggregate, safety net hospitals were operating in the red (-0.02%) in states with CON laws, but they were in the black (+0.69%) in states without them. Their report ultimately concluded that “the traditional arguments for CON are empirically weak, and based on the preponderance of hard evidence, the recommendation should be to allow the program to sunset” while advising this be done with caution. Cavanaugh and Mitchell’s report also argues that the laws harm safety net hospitals.
Ethics and Exclusion
Certificate of Need laws often operate under a restrictive and narrow view of health that is exclusive of certain groups. The Commonwealth of Kentucky regulates around thirty different healthcare services and technologies using certificates of need. These include categories as broad as “home health service” What’s key to remember here is that each of these services, even ones as essential as organ transplantation or “special care neonatal beds” are regulated by policies drafted with the intention of reducing their availability. What isn’t so obvious is the effect this broad regulation has on groups underserved by the existing healthcare landscape.
The home health services mentioned above provide an excellent example. Dipendra Tiwari and Kishor Sapkota immigrated from Nepal to Louisville and observed “an urgent need for the thousands of Nepali immigrants living in the Louisville area to have the option to receive home health care from workers who understood their language and culture.” Their desire to fill this gap was motivated by a concern that language barriers were preventing other Nepali-speaking people from receiving “the services they need.” They were prevented from providing these services when the Kentucky Cabinet for Health and Family Services rejected their application for a certificate of need.
When an application like Tiwari and Sapkota’s is rejected, it is because the state uses a predetermined formula to conclude that there is not sufficient need for a service where the providers wished to operate. For Tiwari and Sapkota to have opened their agency, the state would have had to determine that at least 250 new patients needed the services they wished to provide in that year.
This is done using a rather cut-and-dry formula: take the average amount of people in relevant age groups who used a service in a given county over the past two years and subtract this number from the projected need in that same county, as given by multiplying “the statewide age-group rates by the projected population” by the projected population in each county for the year you’re looking at. If the difference is not 250 or greater, the state has determined there is no need for a new home health service. This could leave 249 patients in the dust, but that doesn’t matter: the formula is final.
However, if an application gets past the formula, it still must demonstrate that a prospective service: a) is accessible b) has connections to existing infrastructure c) is economically feasible and d) will provide high-quality care. The fourth criterion does not seem to be actually reviewed in the CON process, but is something prospective service operators must attest to.
All other issues notwithstanding, the way in which the state approached Tiwari and Sapkota’s case demonstrates that CON laws do not adequately account for the diverse healthcare needs of the populations they intend to serve. The business was regulated as a home health agency, meaning that, under the state’s own formula, its operation was contingent upon a need for home health agencies in Jefferson County. The process of determining the existence of this need does not account for whether existing services can adequately provide for diverse patient populations, whether existing services actually provide high-quality care, or even if existing services are over-utilized. If Nepali immigrants were not using a service because it did not meet their needs, this wouldn’t show up in the calculations. The problem with these laws, as it relates to this example, is that they assume a one-size-fits-all approach to the services they regulate, and do not account for the diverse needs of diverse patient populations.
Home health agencies are not a homogenous category, but the state treats them as one. As a result of this, certain populations are not having their perceived needs met. This approach is not only unnecessarily narrow, but as demonstrated by the home health example, is exclusionary.
This narrow view implicit in CON laws runs philosophically counter to the health concept put forth by Sean Valles. His concept, developed with the WHO’ definition and the life-course approach to health in mind, seeks to correct for the missteps that often lead to the sorts of failures seen in the home health example. Valles states that his concept is intended to be “only as narrow as needed to guide health promotion efforts.” He contends that “diverse communities around the world have healths that genuinely are different.” It would follow from this that health concepts intended to apply to a number of populations, as CON laws do in Kentucky, ought not be exclusive of these populations and their health concepts when possible. As Valles would say, doing so constitutes “imposing a culturally incongruous health concept onto a population”
which is ethically unacceptable. Instead, Valles offers that a concept of “health as a life course trajectory of complete well-being in a social context as the toolbox for a health assessment.” This means that we ought to see health as developing across one’s lifetime in relationship to individuals’ unique social contexts. Doing so would allow legislators and policymakers to consider the diverse needs of the populations they serve when evaluating health parameters.
As it stands, CON laws utilize a narrow formula that fails to adequately account for quality, much less the variations on health concepts inevitably seen in diverse societies. Moving towards a more holistic approach like Valles’ would potentially correct for the errors seen in Tiwari and Sapkota’s case. After all, their contention was precisely that their community’s health needs were not being met–a contention that, while easily understood, is not supported by the narrow evaluative methods used in the Commonwealth.
Conclusion
The presence of CON laws has already been shown to be associated with several undesirable outcomes. If they are to be kept on the books, some changes might be beneficial. We could suggest that the laws be modified to allow prospective providers to operate a business if they can prove that residents in a given county are not having their needs met regardless of what the current formula might suggest. Alternatively, the formulaic mechanism might be tossed out altogether for an approach more compatible with the multiplicity of health concepts that will exist in any diverse state. These concepts might be as simple as desiring home health care from people from your culture or who can speak your language, like in Tiwari and Sapkota’s case, and yet still come into conflict with the laws. Kentucky, especially Louisville, prides itself on its diverse population. Its laws ought to reflect that sentiment, lest we risk failing to provide for our residents’ healthcare needs.
Louisville Political Review 