Why are Georgia and Kentucky hesitant to repeal a law that is restricting health-care access for those who need it most?
Why are Georgia and Kentucky hesitant to repeal a law that is restricting health-care access for those who need it most?
R ural America has a health-care crisis. Nearly 200 small-town hospitals have closed or contracted since 2005, and dozens more are teetering on the edge of collapse. Regulators can help. But when states consider meaningful reforms, industry insiders push back.
The latest battles are unfolding in Kentucky and Georgia, where lawmakers voted to study the repeal of certificate-of-need, or “CON,” laws. A CON is a government permission slip to launch or expand health-care services. Without this piece of paper, investors cannot identify market gaps and respond.
New York rolled out the first CON law in 1964, and Congress added incentives for other states to follow in 1972. The intent was to decrease health-care costs, while increasing access, by reducing redundant spending. Yet none of the promised benefits materialized.
California, Texas, and ten other states ditched their CON laws years ago, while Arizona, Ohio, Indiana, and Montana passed substantial CON repeals. Three more states — North Carolina, South Carolina, and West Virginia — followed in 2023. Kentucky and Georgia remain hesitant.
Part of the reason is because hospital associations love CON laws and see them as a safety net. Yet CON laws do not work. Policy-makers have no need to speculate. All they have to do is follow the evidence, which is particularly compelling in rural areas.
States with CON laws have 30 percent fewer rural hospitals, spend more per patient on Medicaid in rural areas, and have higher emergency-room-utilization rates in rural areas than other states do. CON proponents try to dismiss these comparisons by pointing to demographic and geographic differences, but studies control for these factors and still come to the same conclusion: CON laws are a failed experiment.
Kentucky partially acknowledges the reality and excludes rural “health clinics” from its CON law. But Georgia treats all areas the same. Meanwhile, five states without hospital CON laws — Colorado, Montana, Oregon, Utah, and Wyoming — have had zero rural-hospital closures since at least 2005, when the University of North Carolina started tracking the data.
The unequal results are understandable. Applying for a CON is a slow and expensive process, and many would-be investors don’t try. Others endure months or years of hassle, only to be told no in the end.
Kentucky entrepreneur Dipendra Tiwari took his battle all the way to the Sixth U.S. Circuit Court of Appeals, which said CON laws appeared to have “outlived their utility.” Yet the court upheld Kentucky’s CON law anyway. Tiwari petitioned the U.S. Supreme Court to intervene, but the high court declined to hear his case. So his dream to open a home-health agency for Nepali-speaking refugees died in 2022 because he couldn’t get a CON.
Georgia won’t even accept CON applications for home-health agencies, skilled-nursing facilities, or intermediate-care centers unless regulators declare an unmet need. In other words, Georgia investors must get permission just to ask for permission.
An analysis from our public-interest-law firm, the Institute for Justice, shows another way that regulators rig applications. Kentucky, Georgia, and 31 other states — plus Washington, D.C. — allow established providers to present evidence against rival projects. Regulators ignore the conflicts of interest.
The monopoly power shields hospitals in three ways. They don’t have to worry about talent walking out the door because CON laws restrict opportunities for doctors and nurses. Hospitals don’t have to worry about rivals showing up with cheaper, faster, or friendlier service because CON laws stifle competition. And hospitals don’t have to worry about customer satisfaction because CON laws ensure a captive audience.
It’s a win-win-win for hospitals. The only losers are health-care employees, entrepreneurs, and patients, who get stuck with less access.
Established providers care more about revenue. They fight to keep these laws on the books using evolving rationalizations — unmoored from the original purpose. Updated position statements in Kentucky and Georgia now say little about lowering costs and increasing access. Instead, industry lobbyists claim they need special government favors to offset losses on underinsured and indigent patients.
One of their favorite instruments is the CON. “CON makes it possible to offer those necessary but money-losing services,” the Kentucky Hospital Association claims. In other words, less access means more access.
The upside-down logic falls apart under scrutiny. Georgia and Kentucky lawmakers can continue studying. But it’s time to rip off the Band-Aid.
Jaimie Cavanaugh is an attorney at the Institute for Justice in Arlington, Va., where Daryl James is a writer.