BUSI 304 Week 6 Discussion Board Forum 5 Example

Discussion Board Forum 5: Evaluating Certificate of Need Laws

BUSI 304 Introduction to Health Policy, Discussion Board Forum 5

Thread by [Student Name]

The classmates are composites; the textbook, Scripture and the peer-reviewed articles cited are real.

Certificate of need laws require a hospital, nursing home or other provider to prove to a state board that a community needs a new facility, service or major piece of equipment before building or buying it. States adopted them widely in the 1970s on the theory that excess capacity drives up costs, because providers fill the beds and scanners they build. About 35 states still operate some form of the program, though the services covered vary widely, from hospital beds and nursing homes to imaging equipment, ambulatory surgery centers and psychiatric units. McLaughlin and McLaughlin (2015) encourage analysts to ask whether a policy still serves its original goal under current conditions, and that is the right question here.

The evidence on access is troubling. Bailey and Lewin (2021) found that states requiring certificates of need for psychiatric services had about 20% fewer psychiatric hospitals per million residents and 56% fewer inpatient psychiatric clients per ten thousand residents, during years when demand for mental health care was rising. On quality, Stratmann (2022) found that hospitals in states with these laws performed worse on some quality measures and no differently on others, which suggests that protecting existing hospitals from competition does not make them better. Neither study proves that the laws cause these results, since states that keep the laws may differ in other ways, but both point the same direction.

Who benefits, then? Mainly the providers already in the market, who can oppose a competitor's application before the same board that approved their own. Scripture tells believers not to act from selfish ambition but to count others' needs as well as their own (English Standard Version Bible, 2001/2016, Philippians 2:3-4), and a rule that lets incumbents block competitors in the name of the public needs careful scrutiny. A rule meant to protect patients from waste should not become a fence that protects providers from competition.

I would not repeal these laws overnight, since some rural markets may need time to adjust. I would exempt services where shortages are clear, such as psychiatric and substance use treatment, and require boards to decide applications within a fixed period, so that a competitor's objection cannot delay a needed service for years.

Reply to Hannah

Hannah, you argued that certificate of need laws protect rural hospitals by keeping competitors from drawing away their profitable patients. That concern is real, since rural hospitals operate on thin margins and lose money on emergency and obstetric care that they still must provide. Keesee et al. (2024) found that rural hospitals carried more uncompensated care than urban ones, and far more in states that had not expanded Medicaid, which suggests that coverage policy may matter more to their survival than limits on competitors. The laws also carry costs for patients. Bailey et al. (2022) found that certificate of need rules for substance use treatment did not change the number of facilities or beds but reduced the share of facilities accepting private insurance by 6%, which narrows choices for insured patients seeking treatment and their families. In the middle of an overdose crisis, a rule that makes treatment harder to find with private insurance works against the public interest it claims to serve.

Proverbs urges those with influence to speak up for people who cannot speak for themselves (English Standard Version Bible, 2001/2016, Proverbs 31:8). Protecting rural hospitals is a worthy goal, but direct support, such as Medicaid expansion or targeted payments, may serve rural patients better than restricting who else can serve them. Rural communities also need services their hospital may not offer, such as outpatient mental health or dialysis, and a new provider can fill those gaps without threatening the hospital's core business. Would your rural hospital support a narrower law that protects only emergency and inpatient services?

Reply to Jordan

Jordan, you wrote that certificate of need laws hold down health spending by preventing unnecessary construction. That was the original theory, but evidence for it has been weak for a long time. Grabowski et al. (2003) studied states from 1981 through 1998 and found that those repealing their nursing home certificate of need and moratorium laws saw no significant growth in Medicaid nursing home or long-term care spending. Spending may even rise when entry is blocked, because incumbents face less pressure on price. More recently, Stratmann (2022) found that the laws lower quality on some measures without improving others, so any savings would come at a cost. The underlying theory has also aged: in the 1970s, many hospitals were paid for whatever they spent, so extra beds really did raise costs, but today's prospective payment systems pay fixed amounts per stay, weakening the link between capacity and spending.

Jesus warned against laying burdens on others that we would not lift ourselves (English Standard Version Bible, 2001/2016, Luke 11:46). A regulation that slows new providers while doing little to control cost places its burden on patients waiting for care, and on new providers who spend money on applications and hearings instead of services. Perhaps cost control would be better pursued through payment policy, such as site-neutral payment or price oversight in concentrated markets, than through limits on who may enter. Which services in your state do you think most need the law to remain, and would you accept a sunset date that forces the legislature to review the evidence every few years?

References

Bailey, J., & Lewin, E. (2021). Certificate of need and inpatient psychiatric services. Journal of Mental Health Policy and Economics, 24(4), 117-124.

Bailey, J., Lu, T., & Vogt, P. (2022). Certificate-of-need laws and substance use treatment. Substance Abuse Treatment, Prevention, and Policy, 17(1), 38. https://doi.org/10.1186/s13011-022-00469-z

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Grabowski, D. C., Ohsfeldt, R. L., & Morrisey, M. A. (2003). The effects of CON repeal on Medicaid nursing home and long-term care expenditures. Inquiry, 40(2), 146-157. https://doi.org/10.5034/inquiryjrnl_40.2.146

Keesee, E., Gurzenda, S., Thompson, K., & Pink, G. H. (2024). Uncompensated care is highest for rural hospitals, particularly in non-expansion states. Medical Care Research and Review, 81(2), 164-170. https://doi.org/10.1177/10775587231211366

McLaughlin, C. P., & McLaughlin, C. D. (2015). Health policy analysis: An interdisciplinary approach (2nd ed.). Jones & Bartlett Learning.

Stratmann, T. (2022). The effects of certificate-of-need laws on the quality of hospital medical services. Journal of Risk and Financial Management, 15(6), 272. https://doi.org/10.3390/jrfm15060272