The Bureaucracy of American Healthcare

…has many dimensions. For example, 36 U.S. states currently have so-called Certificate of Need laws on the books, which govern a surprisingly wide array of healthcare activities. I first heard about these laws earlier this week thanks to this conversation between economists Russ Roberts and John Cochrane. Under the laws, certain health-related institutions must get approval before facilities expansion, capital or technology purchases, or the addition of more licensed beds. I pulled the following information from my state’s (Washington State) government website:

Certificate of Need Overview

The Certificate of Need (CoN) program is a regulatory process that requires certain health care providers to obtain state approval before building certain types of facilities or offering new or expanded services.Program staff is available to provide technical assistance to you before submitting your application. Staff is also available to help you determine if a Certificate of Need is necessary.

For example, a Cerfificate of Need would be required if a hospital wants to add to the number of its licensed beds. The Certificate of Need process is intended to help ensure that facilities and new services proposed by healthcare providers are needed for quality patient care within a particular region or community.

Certificate of Need review is required for:

  • Construction, development, or establishment of the following healthcare facilities:
    • Hospitals
    • Nursing Homes
    • Kidney Dialysis Centers
    • Medicare or Medicaid Home Health Agencies
    • Medicare or Medicaid Hospice Agencies
    • Ambulatory Surgical Centers
    • Hospice Care Centers
  • Increases in the number of stations at a kidney dialysis center.
  • Sale, purchase, or lease of all or part of an existing hospital, regardless of profit/non-profit status.
    • Increases in the number of licensed beds at a hospital, nursing home, or hospice care center.
    • Offering a new tertiary health service. These include:
    • Level I Rehabilitation Programs
    • Open Heart Surgery
    • Therapeutic Cardiac Catheterization
    • Organ Transplantation Specialty Burn Services
    • Intermediate Care Nursery and/or Obstetric Services
    • Level II Neonatal Intensive Care Nursery and/or Obstetric Services
    • Level III Specialized Inpatient Pediatric Services
  • A capital expenditure made by a nursing home exceeding 1 million dollars (adjusted for inflation). The 2012 minimum is set at $2,403,990.
  • Nursing home bed banking transactions.
  • Nursing home replacements.

Below is a U.S. map of those states that have CON laws. There is a tremendous amount of valuable information on the subject at this wonderful site maintained by the National Conference of State Legislatures. Government certainly has its place, but if a kidney dialysis center determines that it needs to increase the number of stations available, I’m not sure why a government board should have any say in the matter. These laws undoubtedly increase healthcare costs by adding a bureaucratic layer of processing to many common health facility activities as well as reduce competition by raising barriers to entry for for-profit and non-profit healthcare providers. Wondering if any healthcare economists have done work on the impact of these laws.


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