Certificate of Need (CON) has been around in the U.S. for decades as an attempt to control skyrocketing health care costs through government regulation. But unfortunately, today it’s stifling competition and leading to higher costs.

The theory of CON is simple. Let’s say you have a hospital, and the hospital wants to add beds to increase their inpatient capacity. Doing this incurs costs – building new facilities, medical equipment for each of those rooms, staffing, and more. This causes costs go up.

But what if they don’t have the patients to fill those new beds? What if there is no actual need for all those new costs? All those new empty beds need to get paid for somehow, and the costs end up being passed on to the patients they do have. This is bad because it raises hospital costs, which raises insurance premiums.

A Certificate of Need is something the government bestows upon a health care provider, such as a hospital, to allow them to expand, open a new facility or offer more services.

A provider can only get a Certificate of Need if there is an actual community need.

The problem is that, for the most part, providers building facilities for which there is no demand doesn’t happen. It’s bad business and regulation like CON is largely unnecessary.

In fact, in many instances, it can increase prices by artificially limiting competition.

Take dialysis, for example. If a provider builds a dialysis center in a community that already has enough dialysis facilities, they are going to lose money. No amount of advertising is going to increase the demand for dialysis. Patients either need it, or they don’t.

The only way a new dialysis facility could possibly make money in a saturated market is by drawing patients from existing facilities. And the best way to do that in a competitive environment is to offer lower prices or better services.

But CON eliminates the positive consumer impact of competition by preventing competitors from setting up shop since there isn’t a “need” for another dialysis facility.

Another example is Ambulatory Surgical Centers (ASCs). ASCs provide many of the same services a large, fully equipped hospital can, but at a much lower cost.

The Affordable Healthcare Coalition of North Carolina scored and helped pass a law to remove CON requirements for qualifying ASCs.

Repealing CON laws for ASCs will allow these facilities to offer more affordable care to patients. It will also increase competition, which should place downward pressure on hospital prices and incentivize improved quality of care.

The Affordable Healthcare Coalition of North Carolina is committed to supporting policies that make smart, consumer-focused reforms to our state’s CON law.