Certificate of Need ProgramsA Certificate of Need (CON) program is a regulatory process that requires hospitals and other health care facilities to obtain state approval before offering certain new or expanded services. For example, as part of Dirigo Health Reform, Maine expanded its Certificate of Need program to require greater regional planning and cost oversight. Hospitals and other health care facilities must apply for approval and demonstrate the necessity of new medical technology and devices prior to purchasing them. The CON applications must conform to the budgetary limits of the Capital Investment Fund in the state plan. When health providers seek capital improvements that cost more than $2.4 million, or technology that costs more than $1.2 million, the provider must apply for CON approval.
One of the main purposes of CON programs is to cut, or at least slow health care costs. Several studies, including one done by all three major U.S. automakers have shown lower health care costs in states that use CON programs than in ones that don’t.
- Adjusted health care expenditures per employee were nearly a third less in states with CON programs.
- Impatient and outpatient costs were nearly 20% less. Certain services were also less.
- MRI services ranged from 11-20% more expensive in states that do not use CON programs.
- Coronary artery bypass grafts ranged from 20-39% more expensive in states that do not use them.
CON programs have also been found to improve the quality of service of the states where they are used. By regionalizing certain procedures and services through licensing, some states have decreased the mortality rates of their hospitals.
- Studies done on hospitals performing percutaneous coronary transluminal angioplasty (PTCA) found that the best 100 hospitals performed on average twice the volume of procedures as others and cost 20% less. They were also 50% less likely to have serious complications from the PTCA.24
- Another study in New York State shows that the mortality rates for hospitals that perform more than 100 congenital heart surgeries on children are lower (5.95%) than those with volumes of 100 or less (8.26%).25
- Another study performed comparing the risk-adjusted mortality rates of CON states versus non-CON states for coronary artery bypass grafts found that non-CON states had an average rate twenty one percent higher than that of CON states.26
CON programs prevent the duplication of services, therefore keeping a high volume for the regional hospitals, improving quality and decreasing cost.
Critics of CON programs have often cited the fact that it is a form of government regulation on the markets and prevents entry into competition. “CON regimes prevent new health care entrants from competing with out a state-issued certificate of need, which is often difficult to obtain.” Many of these entrants are believed to be able to provide better quality services than the incumbents. The waiting period for the certificates of need has been at times over a year, if they are approved at all. Critics have also said that incumbents use their influence over CON programs to maintain an oligopoly over the health care market in that region. The have been several public cases over hospital additions or services turned down by CON programs.
For more information about the Certificate of Need program in Maine, see Maine’s Dirigo Health Reform of 2003. Families USA, November 2007. Online at http://www.familiesusa.org/assets/pdfs/state-expansions-me.pdf
23 Thomas R. Piper, "Big-Three Automakers Health Care Costs non-CON vs. CON States," graph from DaimlerChrysler Corporation in presentation before planning panel for the Federal Trade Commission/Department of Justice Hearings on Health Care Competition, Quality, and Consumer Protection, 10 June 2003
24 Ritchie JL, et al. Association between percutaneous transluminal coronary angioplasty volumes and outcomes in the Healthcare Cost and Utilization Project 1993-1994. Am J Cardiol 1999;83: 493-497. Jollis JG, et al. Relationship between physician and hospital coronary angioplasty volume and outcome in elderly patients. Circulation 1997; 95:2485-2491. Shook TL, et al. Comparison of percutaneous transluminal coronary angioplasty outcome and hospital costs for low-volume and high-volume operators. Am J Cardiol 1996;77:331-336. Kimmel SE, et al. The relationship between coronary angioplasty procedure volume and major complications. JAMA 1995;274:1137-1142. Phillips KA, et al. The association of hospital volumes of percutaneous transluminal coronary angioplasty with adverse outcomes, length of stay, and charges in California. Med Care 1995; 33:502-514. Jollis JG, et al. The relation between the volume of coronary angioplasty procedures at hospitals treating Medicare beneficiaries and short-term mortality. N Engl J Med 1994;331:1625-1629
25 Phibbs CS, et al. The effects of patient volume and level of care at the hospital of birth on neonatal mortality. JAMA 1996;276:1054-1059.
26 Vaughan-Sarrazin, MS,Hannan, EL,Gormley, CJ,Rosenthal, GE. "Mortality in Medicare Beneficiaries Following Coronary Artery Bypass Graft Surgery in States with and without Certificate of Need Regulation," JAMA , Vol. 288 No. 15, October 16, 2002, 1859 - 1866