Hospital Industry, States Debate Regulation v. Competition As Means To Reduce Costs, Increase Quality
The hospital industry is divided over whether greater regulation or "unfettered competition" is the best way to improve health care quality at a reasonable cost, and the debate is now "playing out" in several states, the Wall Street Journal reports. While many existing hospitals, which often are supported through public funding, favor greater regulation, new facilities say they "need an atmosphere open to competition, not state regulations." At issue in this debate are "certificate of need" laws, which were enacted in the 1960s and which give state regulators the authority to determine "whether new medical facilities are necessary in a community." The laws, which were intended to "contain the proliferation of health facilities," were scaled back or eliminated by many states in the 1980s, although 36 states and the District of Columbia still have them. But with health care inflation soaring, many lawmakers are now looking to "reregulate or strengthen existing rules," the Journal reports.
The lawmakers' cause has been joined by many employers, "who see in hospital expansions and the proliferation of high-end equipment a big source of soaring health-insurance premiums," the Journal reports. In Michigan, for example, large auto companies, in conjunction with the United Auto Workers, have lobbied to block an effort to eliminate the state's CON law. Daimler Chrysler officials testified in March that the company's annual health care spending totaled $3,519 per employee or family member in Wisconsin and $2,741 in Indiana -- two states without certificate of need laws. In contrast, the company said it spends $1,839 per person in Michigan and $1,331 in New York state, both of which have CON laws. Proponents of regulation also say that new hospitals that focus on specialty areas such as oncology and orthopedics drive business in those high-revenue areas away from existing hospitals, hurting them financially and possibly compromising their ability to provide charity care.
On the other side, "[e]xpansion-minded, for-profit hospitals are able to ally with lawmakers who see competition as a virtue," the Journal reports. They say that existing hospitals use CON laws to "protect their local monopolies," adding that "[b]ulging waiting lists for surgeries are evidence of demand." Without more hospitals, they say, many "patients ... must seek care farther from home." The debate surrounding CON laws is underway in at least six states. In Maine, for example, competing bills this spring called for repealing and strengthening the state's law, one of the strongest in the nation. The bill to strengthen the law prevailed (Wysocki, Wall Street Journal, 5/7).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.