Asheville’s Mission Hospital will soon have a new competitor in Western North Carolina. That’s good news: when a single hospital system dominates a market, that rarely works to the advantage of patients, employers, or physicians.
The bad news here, however, is that it was a state agency that chose which hospital network will build the new 67-seat facility in Asheville.
North Carolina has a regulatory system called certificate of need (CON). To build or expand a hospital, you need what amounts to a permission slip from the state. In the most recent case, three systems applied for a CON to build in Asheville: Novant Health, based in Winston-Salem; AdventHealth, a Florida-based system that already runs a hospital in Hendersonville; and Mission Hospital itself, which is owned by Tennessee-based HCA HealthCare.
The state awarded the CON to AdventHealth. According to Triad Business Journal, Mission may appeal the award while Novant is still considering its options.
I’m not especially concerned that state regulators picked an out-of-state provider over Novant, which already operates major medical facilities in Charlotte, Winston-Salem, Wilmington, and several other North Carolina cities and towns. What concerns me far more is that we still allow state government to make such decisions in the first place.
The original justification for the CON process was that controlling the supply of medical services would tend to reduce the cost and enhance the quality of those services. Yes, it’s obviously counterintuitive to argue that creating monopolies or cartels in local communities would have salutary effects. But advocates insisted that health care was unlike other services.
Because of the prevalence of third-party payers — private insurers and government programs such as Medicare and Medicaid — allowing hospitals and other providers to compete freely would lead to excess capacity, they argued. That would, in turn, induce providers to order more tests and perform more procedures than they otherwise would, in order to justify their investments in new capacity. Costs would go up and quality control would go down.
This argument wasn’t entirely implausible. But in the decades since the passage of CON laws, it’s been subject to real-world testing, since some states have CON and some don’t. Mercatus Center scholar Matthew Mitchell recently compiled a comprehensive set of 93 peer-reviewed studies of CON. Not a single study found clear evidence that the system reduces cost. About 60% of the relevant papers found evidence for the more-intuitive argument: reducing competition through CON raises the cost of care.
On the service side, 74% of studies found that CON reduces patient access to care while most studies found either negative or mixed effects on the quality of care delivered. The most recent study I can find, published a few months ago in the Journal of Risk and Financial Management, found that mortality rates from pneumonia and heart failure were higher in CON states than in non-CON states, and that “hospitals in CON states average six more deaths per 1,000 surgical discharges that result in complications.”
Here in North Carolina, state lawmakers and health-care reformers have been pushing for CON reform for years. Senate leader Phil Berger has made it a condition for his chamber moving forward on Medicaid expansion. Key House members also support reform.
Mitchell, the Mercatus Center scholar, argues that those who aren’t yet on board should follow where the empirical evidence clearly leads. “Hospital executives and policymakers often worry about what would happen in their state if their CON laws were repealed,” Mitchell wrote. “They need not worry. And they need not speculate. They can look to the experiences of Americans in non-CON states to see what is likely to happen.”
The Asheville region isn’t the only market where patients would benefit from more hospital capacity. Rather than continue to allocate that capacity by bureaucratic diktat, we ought to let Novant and its competitors make whatever investments they think will pay off in the long run. We’ve tried Soviet-style central planning. Now let’s try freedom.