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Study questions usefulness of CON

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A recent study from the economic research nonprofit Mercatus Center at George Mason University challenges the economic logic behind certificates of need.

The CON study analyzed data on CONs, healthcare productivity and economic impact from the Healthcare Cost Report Information System, American Hospital Association and American Health Planning Association.

According to the study authors, CONs act as barriers to entry to reduce the competitiveness, and therefore the quality, of the medical sector, though they increase the profitability of providers who do manage to obtain them.

Katherine Restrepo, a healthcare policy analyst at the John Locke Foundation, a political organization based in North Carolina, commented on the report and says CONs severely limit the ability of providers to offer "innovative services" to patients and uphold high healthcare prices, due to the restriction of the supply of healthcare providers.

In her analysis of the report, Ms. Restrepo notes the recent Triangle Business Journal article on the surgical trend in North Carolina where payers are incentivizing outpatient surgery; North Carolina's CON laws may create limits on efficiency and pricing improvements, due to the restricted number of outpatient facilities in the state, she writes.

While this viewpoint is specific to supporters of free-market style healthcare, controversy over CON laws is not new. The first U.S. CON program — New York — turns 50 this year, and the reign of the CON is widespread. CON laws exist in 37 states, despite efforts in several of them to modify or repeal the requirements.

CON requirements have varying implications for different types of healthcare providers, which is one of the reasons why they are so controversial. For ASCs, CONs are a mixed bag. On one hand, they are a significant barrier to market entry. Hospitals and other healthcare institutions with strong market shares or in positions of power can oppose new healthcare providers entering the market and make it difficult for small providers to obtain a CON. On the other hand, when providers are able to obtain a CON, the lower supply of providers in the market is beneficial for business.

States in which CON laws have recently become involved in controversy include Alabama, Illinois, Maine, Montana, North Carolina and most recently South Carolina, according to analysis from Becker's ASC Review. In South Carolina, the state Supreme Court effectively decided to require the CON law to continue running, despite the fact that its funding had been vetoed by Governor Nikki Haley and all staff had been laid off and the program shut down.

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