CON Laws Stifle Innovation, Weaken Markets, Say FTC and DOJ

Certificate of need laws undercut consumer choice, stifle innovation and weaken markets' ability to contain healthcare costs, said the U.S. Department of Justice and Federal Trade Commission in a joint statement to the Illinois Task Force on Health Planning.

As part of its examination regarding eliminating or amending the state's CON requirements, the task force requested that the federal agencies comment on their views on CON laws. The statement reiterates the FTC's and DOJ's ongoing efforts to promote competition in healthcare, they say.

"State CON programs generally prevent firms from entering certain areas of the healthcare market unless they can demonstrate to state authorities that there is an unmet need for their services," say the agencies in a press release. By creating barriers such to entry and expansion, CON laws impede the efficient performance of healthcare markets, which is to the detriment of both healthcare competition and consumers, the joint statement says.

The agencies further note that the CON process itself is susceptible to corruption, as it may facilitate anticompetitive agreements among providers, and existing competitors may exploit the CON process to their advantage by thwarting or delaying new competition. The statement goes on to discuss economic research on the effects of CON laws and to evaluated several arguments in support of CON laws, noting that the original cost-control reasons for CON laws no longer apply and that CON laws are an ineffective means to fund indigent care.

For these reasons, the agencies encourage the Illinois task force and officials in other CON states to consider whether such laws do more harm than good; the agencies will present their views at a task force meeting on Sept. 15. Download a copy of the joint statement.

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