January 22, 2016

State Legislature Consider Certificate of Need Repeals

Legislatures in several states are engaged in a fierce debate about the future of Certificate of Need (CON), a government cost-containment program than requires health care services to demonstrate the local need for proposed health facilities and expensive technologies, such as gamma knives and MRI systems.

Bills seeking to modify, add exemptions or repeal CON programs have been filed in Florida, Georgia, Michigan, New York, South Carolina, Tennessee and Virginia. Proposed CON legislation is expected in North Carolina.

Opponents of CON laws, including the American Medical Association (AMA), argue that such programs are ineffective in controlling healthcare costs.

In 2004, the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) found that CON programs actually contribute to rising prices by inhibiting competitive markets. In July 2015, the FTC submitted comments to the North Carolina House of Representatives supporting a bill to lessen the requirements of its existing statute. Last week, the DOJ and FTC issued a joint statement suggesting that South Carolina repeal its CON laws. This recommendation is very similar to the statement the agencies presented to the Virginia legislature in the fall of 2015. It also suggested the state’s CON laws should be repealed.

Though the federal CON mandate was allowed to sunset in 1987, 36 states still maintain some form of CON regulatory requirement. Most state CON statutes aim at restraining health care costs by coordinating the planning of new services or facility construction, but services regulated by CON vary greatly. Some states apply CON restrictions to hospital construction, long-term-care facilities and nursing home beds. Others regulate ambulatory surgical centers, psychiatric facilities and renal dialysis centers. In some cases, the statutory requirements are triggered when the overall capital expenditure exceeds a certain threshold for specific equipment. The requirements of greatest concern to radiology are enforced by states that regulate scanners (PET, CT and MRI), radiation therapy services, and mobile imaging technology.

The National Conference of State Legislature has posted a comprehensive state-by-state rundown of CON laws and regulatory requirements on its website.