As the Federal Trade Commission celebrates another victory in challenging a hospital merger, a policy advisor from Stanford University argues that U.S. policies intended to limit healthcare costs by restricting the supply of hospitals are actually exacerbating the very issue they were meant to address.
Lanhee Chen, PhD, the David and Diane Steffy fellow in American public policy studies at the Hoover Institution and director of domestic policy studies and lecturer in the public policy program at Stanford (Calif.) University, expressed his concerns in a June opinion piece in JAMA. He contends that supply-side restrictions on U.S. healthcare have led to unintended consequences such as the consolidation of market power, limited access to care and higher costs for patients.
Dr. Chen's commentary focuses on certificate of need laws, in which a state's health planning agency or other entity must approve the creation of new healthcare facilities or the expansion of existing ones. He also examines certificate of public advantage laws and the restrictions on physician-owned hospitals, the latter of which were enacted under the 2010 Affordable Care Act.
"Even though some of these policies were well-intentioned and designed to control costs, they have, in practice, undermined competition and ironically led to higher prices in the long run," he posits.
Key points and arguments from Dr. Chen's opinion piece include:
1. Decline in hospitals: The number of hospitals in the US dropped by 22% from 1974 to 2015, with rural areas hit hardest, leaving nearly 30 million people more than an hour away from trauma care.
2. Restrictive laws backfire: The healthcare industry has not increased the number of facilities due to laws intended to limit hospital spending that, according to Dr. Chen, have paradoxically had the opposite effect. Certificate of need laws, although repealed at the federal level in 1987, still exist in various forms in many states, restricting the supply of new or renovated hospitals and other care facilities. As of February 2024, 35 states and Washington, D.C., operate CON programs.
3. Pandemic impact: "The COVID-19 pandemic illustrated the troublesome consequences of CON laws," Dr. Chen writes. "During the pandemic, states with CON laws restricting the number of beds had 12% higher use rates and hospitals in those states were 27% more likely to have all their beds filled."
Dr. Chen urges state and federal policymakers to recognize the unintended effects of these laws and regulations and to consider whether repealing or modifying them could benefit patients and communities. He highlights that "too few health policy analysts and commentators have focused on these supply-side limitations, which significantly restrict the number of clinicians and health care facilities."
Find the JAMA opinion piece, published June 27, in full here.