A Michigan Law Rations The Number Of Hospital Beds

Many states including Michigan have Certificate of Need laws that restrict the number of facilities and hospital beds that medical service providers may offer.

Now a new paper from an arm of George Mason University’s Mercatus Center finds evidence that among other problems, these laws violate state anti-trust and restraint-of-trade laws.

Federal mandates and financial incentives caused all but one state (Louisiana) to enact CON laws in the 1970s, under a promise that they would reduce health care costs.

Christina Sandefur wrote the new paper for the Mercatus Center’s Regulatory Transparency Project and found that whatever benefits these laws may have, they haven’t been flowing to patients or taxpayers.

“Instead, the primary beneficiaries of CON laws are existing providers, who use them to block competitors from encroaching on their markets,” Sandefur wrote in the paper, which is called “Competitor’s Veto: State Certificate of Need Laws Violate State Prohibitions on Monopolies.”

The federal mandate to adopt these laws was eventually repealed after the Federal Trade Commission and Department of Justice found they raised health care costs, reduced the quality of care and limited accessibility for those who need it most. But operators of existing hospitals and facilities benefit from being able to restrict potential competitors. They have successfully used their political clout to keep all but 15 states from repealing restrictions on new players entering their markets.

Sandefur says academic research and the American Medical Association have backed the initial findings that CON laws “have failed to achieve their intended goal of containing costs,” but have restricted patient options.

In fact, Sandefur says the AMA acknowledged that the laws “tend to be influenced heavily by political relationships.”

Her paper cites numerous examples of how these laws have failed patients in different states.

In Hawaii, for example, Sandefur says the CON requirement has prevented smaller islands from getting much needed medical facilities. One example is that each year, 350 cardiac patients on the island of Maui must be transported to Honolulu for treatment.

The paper does not address Michigan specifically, but according to Sandefur, the problems here are largely the same as those found in other states.

In 2019, Michigan legislators took a modest step to push back against the law for the first time by voting to disallow a Certificate of Need commission’s move to limit patient’s access to a new cancer treatment to just four of the state’s largest hospital systems. The state Senate overcame resistance from the hospital lobby and also passed a very modest limit on the commission’s authority. Legislation introduced in the House to repeal Michigan’s CON regime has been referred to the House Health Policy committee, where no hearings have been scheduled.

There has been no legal challenge to this state's CON law using the Michigan Antitrust Reform Act, which prohibits businesses from establishing monopolies in the state.

Sandefur believes CON laws remain on the books because they benefit industry insiders who lobby hard to keep them in place. She observes that the “courts should take a stand in favor of protecting citizens against the injustice of government-established health care monopolies.” But courts, she says, have historically been reluctant to intervene in health care matters.