Commentary: Repeal Vermont’s CON Laws (November, 2017)

By Rob Roper

Kevin Mullin, chairman of the Green Mountain Care Board (GMCB), appeared on the WDEV radio program Open Mike (10/11/17) to discuss Certificate of Need (CON) laws in the wake of a controversy regarding Copley Hospital and their highly successful orthopedic surgery center. Copley is, apparently, generating too much revenue as the result of being highly efficient, performing more surgeries (they have not raised prices), and delivering what is recognized as superior service and outcomes for their patients. In the screwy world of CON laws, this is bad.

CON laws essentially require a special permission slip from the government, in Vermont’s case the Green Mountain Care Board, to start providing or to expand healthcare services. CON laws are supposed to control costs by limiting access to care, and are a malignant anachronism with roots in a failed federal healthcare policy of the 1970’s. Most states have done away with CON laws for good reason: they don’t work. In fact, they make every important aspect of healthcare demonstrably worse.

States that have ditched their CON laws have on average lower healthcare costs, better health outcomes for patients, and greater access to care. Vermont, however, as one might suspect, subjects more aspects of the healthcare industry (30) to the CON process than any other state. The results: as a recent study by the Kaiser Foundation determined, between 1991 and 2014 hospital expenditures in Vermont have increased faster than any other state in the US. That’s a pretty epic fail for a policy that’s supposed to keep hospital expenditures in check.

So, why do we still have CON laws? There are no good reasons. But the bad reasons are cronyism and that Vermont’s guiding principal regarding healthcare today is to ration access to it.

Politicians will deny that their goal is to ration access to care, but here’s what Mullin said when asked why we need a GMCB:

We are the regulators… we have to be the ones who are putting the breaks on utilization. And so that is our role.

“Putting the breaks on utilization.” That’s rationing.  It means denying care to someone who thinks they need it. Maybe they do, maybe they don’t, but is a six member panel of politically appointed bureaucrats in Montpelier really who we want making that decision? Mullin further reinforces the rationing argument when he says:

The cost of healthcare isn’t just what it costs for a given set of procedures, because you can hold that constant, but if people had more use of those procedures you can still have rising healthcare costs.

It’s not the cost of the procedure that’s driving up cost, it’s the number of patients utilizing the procedure. Sure. 2 x10=20 and 3×10=30. This is what was happening at Copley. But if three people need a procedure, the way the GMCB will go about “bending the cost curve” is to make sure only two people get it. Rationing.

And then there’s cronyism.

Although the original intent of CON laws was to prevent the “overbuilding” of healthcare infrastructure, the unfortunate misuse of the laws, where they continue to exist, has been to block competition from taking business away from the politically favored. Mullin laments,

What I have concerns about is when hospitals – and they hate it when I use this term… — is “poach” on another hospital.

What Mullin calls “poaching” is, by another name, healthy competition — one provider attracts customers by providing better outcomes, lower cost, shorter wait times, etc. This is the case at Copley, where the orthopedic surgical center has earned an outstanding reputation, and patients want to get their care there. Other examples of healthy competition include Vermont MRI, which had to get a CON to provide a cheaper alternative for medical imaging, and the new surgical center in Colchester that had to spend $250,000 and waste years going through the CON process.

The opposite of the “poaching” scenario is government picking winners and losers, which is what we have now. And, to paraphrase Napoleon, government is on the side of the biggest lobbing firms. This is why instead of rewarding Copley Hospital for exceptional efficiency and superior quality and using it as a model example to others, the GMCB is instead threatening to revoke Copley’s CON altogether. Is it any wonder our healthcare system is a mess of rising costs and increasing wait times?

It’s time to subject our CON laws and the Green Mountain Care Board to a Certificate of Need process. I think we’ll find we don’t need either of them.

– Rob Roper is president of the Ethan Allen Institute. He lives in Stowe.