Certificate-of-need law too full of loopholes

Wednesday, July 2, 2003

Another loophole in Missouri's certificate-of-need program for medical facilities and equipment was exposed recently. A Kansas City hospital's legal challenge resulted in getting the go-ahead to build a suburban hospital even though the Missouri Health Facilities Review Committee, which issues certificates of need, had turned it down.

With this latest end run around a major obstacle that prevents a free medical market, it becomes clearer that the certificate-of-need requirement should be abolished.

Designed to hold down costs

Currently, a certificate of need is required for new hospitals, nursing homes, assisted-living facilities and purchases of medical equipment costing more than $1 million. The law -- 36 states have similar laws -- is designed to hold down health-care costs and protect community hospitals. Proponents of the certificates say the law prevents unfair competition by providers that only offer high-profit services without having to also provide costly basic care.

There is some basis to those arguments, except for the fact that providers have found ways to skirt the law ever since it was first adopted in Missouri in 1979. For example, some providers find ways to break up major expansions into several smaller projects that cost less than $1 million each.

The latest way to get around the law, it appears, is to force a constitutional question that ultimately could end the certificate-of-need program entirely. State officials in this case weren't willing to risk that. Here's what happened:

St. Luke's Hospital of Kansas City wants to build a satellite hospital in Lee's Summit, Mo. This affluent suburb on the southeastern edge of the city is already served by Lee's Summit Hospital, which not only caters to a largely white-collar community, but also is located next door to John Knox Village, a large retirement and assisted-living community with more than 2,000 residents.

The Health Facilities Review Committee denied a certificate of need for the hospital proposed by St. Luke's. After St. Luke's appealed, a judge reversed the committee's decision but upheld the certificate-of-need law. Both St. Luke's and Attorney General Jay Nixon appealed that decision -- the hospital on the basis that the law is unconstitutional, and Nixon on the basis that the committee's decision should have been upheld.

Both appeals were withdrawn last month in a standoff victory for the hospital, which received its certificate of need. Nixon said the danger of having the law declared unconstitutional was greater than letting St. Luke's have its way in this instance.

Those who support certificates of need point to studies showing that health-care costs are lower in states that require them. And the director of Missouri's program says more than $1 billion has been saved in capital costs as a result of the certificate requirement.

Let the marketplace decide

But there are countless instances where the law has been circumvented. Without the law, both health-care providers and the state would no longer have to bear the expense of the certification process. And the marketplace, in the end, would determine who builds new medical facilities and where they will be located.

Several legislative attempts to repeal all or part of the law have been made in recent years, but none has made it to the floor of either the House or Senate for debate. This is at least partly because of the strong lobbying efforts by such heavy-hitting groups as the Missouri Hospital Association, which opposes repeal.

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