George Gibbs Center for Economic Prosperity

Flor⁠i⁠da cer⁠t⁠⁠i⁠f⁠i⁠ca⁠t⁠e of need law s⁠t⁠alls grow⁠i⁠ng commun⁠i⁠⁠t⁠y’s ques⁠t⁠ for a hosp⁠i⁠⁠t⁠al

By: Guest Author / 2017

In 2003, the city of North Port looked at its rapidly growing population and made a decision: Sometime soon, it wasgoing to need a hospital.

Unfortunately for North Port, Florida is a certificate of need state, which means that a state regulatory board determines what services, technologies and facilities are allowed to enter the health care marketplace.

Fourteen years later, North Port has a 104 square mile footprint, more than62,000residents — nearly triple its year2000 population— and zero hospitals. North Port’s Sarasota County neighbor, the city of Sarasota, has 7,000 fewer residents yettwo hospitals.

“Florida’s certificate of need laws are more restrictive than ever,” Logan Pike, director of public affairs at the James Madison Institute, told Watchdog in an email. “Regulators in Florida have continued to add devices and services that require CONs while other states have decreased their CONs.”

In 2011, Florida subjected only 11 devices and services to CON requirements. By 2016, that had grown to 17 CON restrictions, including on CT scanners andneonatal intensive care units. George Mason University’s Mercatus Center ranks Florida as the nation’s32nd most restrictivestate.

Although the policies originated in New York in 1964, CON laws have been on the books in Florida for nearly 45 years.Bottom of Form

They were introduced with the stated aim of limiting the supply of health care, under the logic that doing so would allow the state to control costs. By preventing health care providersfrom over-investing in facilities, CON programs were thought to keep costs lower. Moreover, Florida and many other states use CONs in an effort to indirectly subsidize health care for the poor.

“In effect, these programs intend to create quid pro quo arrangements: State governments reduce competition, increasing the health care for some, and in return medical providers use those contrived profits to increase the care they provide to the poor,”according toMercatus scholars Christopher Koopman and Thomas Stratmann.

Koopman and Stratmann argue that there is no evidence that CON programs improve poor residents’ access to health care. However, there is ample evidence that patients in CON states fare worse.Among other things,patients in CON states have worse outcomes following hospitalization for pneumonia, heart failure, heart attack and post-surgery complications.

The researcherscontend that if Florida was not a CON state, residents in Miami-Dade alone would have access to approximately 3,428 more hospital beds, 18 more hospitals that offer CT scans, and between five and 10 more hospitals offering MRI scans. “For those seeking quality health care throughout Florida, this means less competition and fewer choices, without increased access to care for the poor,” they write.

The Federal Trade Commission agrees. In 2008, a bill to scale back CON laws was introduced in the Florida Senate. TheFTC delivered testimonyin support.

“CON laws were adopted throughout most states under particular market and regulatory conditions substantially different from those that predominate today and were intended to help contain health care spending,” the FTC argued.

“The best available research does not support the conclusion that CON laws actually reduce such expenditures. As the FTC and [the Department of Justice] have said, ‘on balance, CON programs are not successful in containing health care costs, and … they pose serious anti-competitive risks that usually outweigh their purported economic benefits.’”

The FTC added that CON laws are easily abused by providers seeking to quell competition.

No surprises

Despite all of the evidence that CON laws are a failed policy, Mercatus scholar Matthew Mitchell says he’s not surprised when CON reform fails.

“It’s actually pretty astounding that any states get rid of CON because the special interests that benefit from it are so much better organized than the general and diffuse interests that are harmed by it,” Mitchell, director of the Project for the Study of American Capitalism, told Watchdog. “Those who benefit from CON laws are just a handful of politically sophisticated, politically organized hospitals.”

Mitchell also noted the human cost.

“One thing I’d point out is CON sounds technical, and of course the research that looks at it gets into the point estimates, and what’s statistically significant and not statistically significant, and us economists we like that stuff,” he said. “But as a human, I feel like I also ought to point out that there’s real lives at stake here and there’s patient access that’s at stake here.”

The people who suffer from CON laws are patients and taxpayers, and would-be providers who are barred from the health marketplace — generally speaking, not a well-organized group.

In North Port, however, the community rallied strongly for a hospital in 2003.

“The city delivered approximately 20,000 letters of support for a hospital along with a willing hospital partner to [the Agency for Health Care Administration] and applied for a certificate of need,” Dr. Lee Gross told Watchdog. Gross is a primary care physician in North Port and president of theDocs 4 Patient Care Foundation, a non-profit devoted to preserving patient choices and protecting health care freedom.

Vanessa Carusone, vice mayor of North Port, said the developer who spearheaded the movement had health troubles himself. “That’s what inspired him. After hearing so many people locally state how detrimental it was not having a hospital nearby, he took the initiative,” she said.

Gross says that North Port’s CON application was initially approved. Then the surrounding hospitals appealed the decision, arguing that North Port couldn’t support its own hospital and questioning the city’s growth projections. In 2004, North Port’s certificate of need for a hospital was rejected on appeal.

As it turns out, the city’s growth projections were spot on.

So North Port pursued a CON bid again in 2016, but eventuallyended the pushafter being unable to find a hospital company to partner with.

That means patients in North Port must travel to Venice, Englewood or Port Charlotte for the nearest hospital. Carusone told Watchdog that, in many cases, North Port residents are looking at as much as an hour in the car to get to a hospital. With roads clogged by tourists and snowbirds, that can be even longer in the winter.

It’s not just an issue of mileage, she said, which people outside of the community don’t understand. “If you’re driving to [Venice Regional Hospital] at 2:45 p.m., you’re not going to get to the island of Venice in an appropriate time because it’s a two-lane road. And school’s letting out. And it’s an island.”

Carusone said that the result of North Port’s 2003 battle for a CON was that the city got on the map for needing health care. “Ultimately what happened as a result of that is we got our emergency room from Sarasota Memorial Hospital, with the promise that the next certificate of need would be for a full-fledged hospital in North Port.”

But that’s not what happened. Instead, Sarasota Memorial and Venice Regional applied for certificates of need in the last 2016 application cycle to put hospitals in neighboring Venice.Their CONs wereapproved.

“So, we now have two brand new hospitals going up outside of our community, after our community was turned down for a CON,” Gross said. “It almost guarantees that we’ll never get a hospital as long as the CON process remains in place. They’ve essentially barricaded us into our own community.”

Another shot

Florida’s 2017 legislative session, which begins in earnest in March, might present a broader opportunity.

Mitchell said that the anti-CON movement is making headway in a lot of states. He called it a “common-sense bipartisan solution,” and an example of the way policy reforms can happen at the state level even while health care policy at the federal level is highly politicized.

“You see both progressives who are worried about inequity and the idea of using regulations to improve the bottom line of wealthy and well-connected hospitals [who] are skeptical about this, and free-market types who want to see more open competition and don’t like restrictions on entry also opposed to CON.”

In the Florida legislature, state Rep. Alex Miller, R-Sarasota, filedH.B. 7last month, which would eliminate much of Florida’s CON regulatory process.A similar bill,S.B. 676, was filed by state Sen. Rob Bradley, R-Fleming Island.

On Wednesday, Miller’s billgot a mixed reception from members of the House Health Innovation Subcommittee. When it came time for public testimony, lawmakers were flooded with a stream of representatives from hospice and nursing care facilities operating in the state arguing that the CON process was working just fine for them.

Miller,a former member of theSarasota County Public Hospital Board and CEO of a family-owned medical supplies firm,noted that CON laws were distinct from licensure, and that the Agency for Health Care Administration would still be setting standards for all new facilities. She added that it often costs a facility a million dollars and two years of administrative and legal activity to clear the CON process — money and time that she argued would be better spent innovating and serving patients.

“We can either stand in the way of progress and innovation, or we can be bold and fearless and remove these antiquated and market-restrictive regulations that even our own federal government says is anti-competitive and ineffective at controlling cost,” she told the committee.

The committee approved the bill on a party-line 10-5 vote. But several Republicans who voted for the measure expressed reservations — particularly about ending CONs for hospice and nursing facilities — and said it would need to be amended along the way to maintain their support.