Certificate of Need Law
Lake Norman Chamber of Commerce February 21, 2014
F. Del Murphy, Jr.
Mission Statement
The mission of Carolinas HealthCare System is to create
and operate a comprehensive system to provide healthcare
and related services, including education and research
Certificate of Need (CON) – A Brief History
• CON laws were established voluntarily by over half of the states in the U.S. between 1966 and 1975 to control rising healthcare
spending
• In 1976, CON became a federal mandate, and all states (except Louisiana) complied with the law
• North Carolina established its CON law in 1978 • The federal mandate was abolished in 1983
• The majority of states have continued to maintain CON laws, although the strength and breadth of the laws vary from state to state
CON Laws Across the United States
No CON – 14 CON – 36
Primary Objectives of the NC CON Law
• Manage the
cost
of care
• Ensure
access
to care
When is a CON required in NC?
• Regulated service or technology
• Any project over $2,000,000 in
capital expenditures
• Medical equipment over $750,000
• Projects exempt from review
Computerized Tomography Scanners (CT)
MRI Scanners Linear
Accelerators
Open heart surgery
NICU
Transplants
Operating rooms
New Beds
NC’s Annual Planning Process
• NC State Health Coordinating Council oversees development of the annual SMFP
• SMFP determines services, beds or equipment needed in a
community
• Providers can file special needs petitions to change the SMFP
• The governor can add or delete items from the SMFP before
Why do we need CON regulation?
Three Reasons
1.The U.S. spends more on healthcare than any other country
in the world (and by a large margin)
2.Research shows the more medical resources that are
available in a community, the more they will be utilized
3.The structure and functioning of the healthcare industry is
very different than other industries – it competes on quality
and service, but it is not a pure free market-based system
The U.S. spends more on healthcare than any
other country in the world due to four factors
Four Reasons
1.U.S. citizens want more and can afford more
2.Significantly higher administrative costs
3.Year-to-year inflationary aspects are built into the
system
U.S. is spending much more for older ages
The U.S. spends significantly more as
patients age and need healthcare services
The structure and functioning of the
healthcare industry is
VERY DIFFERENT
than other industries – it competes
on quality and service, but it is not a
Can you name another industry where…?
1. The government sets the prices – typically below the cost of
care
2. Price is not a major factor in most buying decisions
3. The overwhelming majority of services are consumed in the
last few years of the consumer’s life
4. Services must be provided (by hospitals) regardless of the
consumer’s ability to pay for the service
5. Consumers do not make buying decisions alone…
insurance plans and physicians are almost always involved in the buying decision
Can a free-market system in healthcare increase
competition, lower costs and improve outcomes?
We need to proceed with caution – it is not that simple!
• The free-market system has an impressive track record for
spurring economic growth
• A primary goal of free-market enterprise is to increase
consumption…in healthcare we are trying to reduce consumption via improved health
• The industry conundrum: how can we bring down healthcare costs through a totally free-market system where the goal is to sell more services?
Based on independent research, there are three
critical and direct benefits of CON regulation
• Lower healthcare costs
• Better clinical outcomes
• Improved access for the underinsured
Research example: employer healthcare
costs are lower in CON states
90 95 100 105 110 115 120
Indiana Ohio Kentucky Missouri Michigan
18% above Michigan 12% above Michigan Set at 100 5% above Michigan 2% above Michigan
Hospital Inpatient Relative Cost (Per 1,000 Members Normalized to
Michigan Year 2000 = 100) 105 110 115 120 125 21% above Michigan 21% above Michigan Set at 100 About same as Michigan 4%
Hospital Outpatient Relative Cost (Per 1,000 Members Normalized to
Michigan Year 2000 = 100)
High Risk Surgeries Estimated Mortality Rates 2.8% 1.0% 6.2% 15.8% 3.9% 5.9% 1.9% 0.6% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Coronary Artery Bypass Graff Esophageal Cancer Surgery Elective Abdominal Aortic Aneurysm Repair Coronary Angioplasty
High-Volume U.S. Hospitals Low-Volume U.S. Hospitals
Research example: higher volume
hospitals have better clinical outcomes
•
Access to care
. Most respondents agreed that CON
regulations
protect access to safety net hospitals
and access to care in rural communities, either by
requiring the provision of charity care or by having
applicants address the potential impact on the safety
net. Though research on this topic is scant,
studies
have indicated that CON regulations improve
access to care for the underserved
.
Research example: CON regulations improve
access to care for the medically underserved
North Carolina’s CON Program:
A Model for Other States
• A consultant summarizing state CON programs for the Washington
State CON Task Force ranked North Carolina and Michigan as having the most effective programs.
• Key elements highlighted from the North Carolina CON process include:
– Development of an annual plan by a well-staffed state council with considerable public input, following clear statutory standards of “need” – The result has been broad geographic access to all but the most
complex services and reduced healthcare costs due to “… limited development of specialty hospitals, free standing ambulatory surgical centers and diagnostic centers as well as acute care, psychiatric, nursing and assisted living beds.”
$10,852 $10,444 $9,880 $9,773 $9,671 $8,640 $8,238 $9,000 $10,000 $11,000
Regions of the U.S. with more facilities
and resources have higher costs
No CON CON
Medicare Expenditures per Enrollee
Researchers at the Dartmouth
Institute of Health Policy and Clinical Practice have concluded that
regions with the greatest number of facilities and resources also have higher costs. Further, the
researchers have concluded that more care does not translate into better outcomes.
Of the 23 states without CON for acute services,
21 spend more on hospital care than NC
Summary – CON Law Benefits
1. Operating costs are lower in higher volume facilities
2. Clinical outcomes and quality are better in higher volume
facilities
3. Access is maintained for the medically underserved
4. Access to highly specialized services is supported, e.g. emergency departments
5. Controlling aggregate capital expenditures is a recognized strategy for controlling overall healthcare costs, e.g. European countries, Dartmouth research
“While CON regulations and their administration are by all accounts imperfect, most respondents believe that CON programs should remain in place in their state and would benefit from increased funding for
evaluation, improved compliance monitoring and movement toward a process driven more by data and planning rather than political
