The Detroit News
March 1, 2002
Letters
Should state hospital rules be eliminated?
(1) Program reduces care costs
The Feb. 24 article, "State rules pinch patient care," stated that some state legislators and Engler administration officials want to eliminate the certificate-of-need program, though many experts believe that rash action would be a mistake.
Michigan's nonprofit hospitals support the CON program and its independent commission because it's a useful tool and rational method to distribute costly health care technology.
Hospitals agree that improvements to CON should be made, particularly to streamline the application process, hire adequate numbers of staff for prompt review and assessment of pending issues, and make the program more responsive to demographic changes. But these changes can be accomplished within the current structure and without dismantling a program that has helped moderate cost increases and assure access to high-quality care throughout Michigan for the last 30 years.
There's a reason so many of the state's largest employers and unions, insurers, business groups, trade associations and health care providers strongly support retention of the CON program: It works.
Spencer Johnson President, Michigan Health & Hospital Association
(2) Let market control costs
The headline of Feb. 24 article "State rules pinch patient care," regarding the antiquated and arcane certificate-of-need (CON) laws, could not be more accurate.
It's not called CON just because it's a handy three-letter acronym. This system "cons" people into believing it is a just and rational process of health care cost containment when, in fact, it simply perpetuates the status quo. Patient care does suffer when de facto franchises are rationed out to entities with the most money, influence, lobbyists and lawyers. Patients often wait weeks for services or are forced to schedule a procedure in the middle of the night.
CON is a cumbersome, costly and anti-competitive process. Our economic system is based on the principle that innovation in the marketplace will lead to a better, more cost-effective product for the consumer. CON restricts innovation by eliminating competition. Without competition, there is no incentive to cut costs. It would be worthwhile to review the cost of a procedure at a free-standing surgical center compared to a CON-protected surgical center.
The health care marketplace has changed dramatically since CON first went into effect 30 years ago. Every health care dollar is squeezed by health maintenance organizations, insurers, businesses and government. If CON laws are repealed, no one will offer a service unless it can be proved to investors that it provides convenient, high-quality care for the patient and is cost effective for the payer. It's time to reform CON.
Kenneth H. Musson, M.D. President, Michigan State Medical Society
<http://detnews.com/2002/editorial/0203/01/a08-429352.htm>http://detnews.com/2002/editorial/0203/01/a08-429352.htm
For the original article: <http://detnews.com/2002/health/0202/24/a01-425376.htm>http://detnews.com/2002/health/0202/24/a01-425376.htm
Comment: Convenient? High quality? Cost effective? Does the certificate-of-need program improve allocation of our health care dollars, improving efficiency and access, or does it interfere with the market's allocation of dollars which would otherwise provide convenience, quality and cost effectiveness? Let's look at the issues.
Facts:
** All payers recognize that increases in health care costs must be brought under control. It is essential that our limited resources must be utilized efficiently.
** Regional expenditures in capital improvements increase the local capacity of the health care system.
** Increased capacity does result in increased utilization of services and increases in health care spending.
** Increases in spending associated with greater capacity have not been demonstrated to improve health care outcomes for the community compared to communities with average capacity.
** Impaired access due to lack of capacity in poor communities does impair health outcomes.
The debate over whether or not to utilize a certificate-of-need program is a debate over whether regulatory oversight is more effective or less effective than encouraging free investment under market conditions as a means to improve access and efficiency of our health care resources. It is an issue over how we can best balance the need to spend adequate dollars to assure access to needed services against the need to limit expenditures to assure adequate return for the public or private investors. (The correlation between lower quality and private investment has been noted in many studies, but this discussion is limited to the policies behind the certificate-of-need process.)
Mission controls behavior. The mission of the agency administering the certificate-of-need program is to assure that health care dollars are used optimally to obtain the greatest benefit for the most patients considering that there are limits to our resources. The mission of the facility providers in the market is to maximize the return on investment. Since these are different missions, it can be anticipated that the behavior will be different.
Investors in facilities such as private hospitals, imaging centers, and diagnostic and therapeutic cardiac laboratories will direct their investments to locations that marketing surveys indicate will bring the greatest return on their investment. This means that new or expanded facilities are directed to affluent areas with incomes and insurance coverage that will support these facilities. In many instances, this creates excess capacity for needs, but that capacity will be utilized at the will of physicians who profit and patients who want more care but who do not realize that excessive care is wasteful and may even be harmful. Thus the market inherently wastes health care resources for the affluent while neglecting areas with real need but with limited funding resources.
The certificate-of-need process is designed specifically to prevent the creation of excess capacity which increases utilization and costs but does not improve outcomes. Although sometimes difficult, the process does attempt to assure that an adequate level of services is accessible to everyone and that technological advances that improve outcomes are made available as appropriate.
So what about Dr. Musson's claim that eliminating the certificate-of-need allows the market to provide convenience, high quality, and cost effectiveness? By creating excess capacity, the market provides convenience, but only for affluent localities. Since funds are held back from poorer regions, convenience is further impaired, in fact, to the extent that access is frequently significantly impaired. Quality in health care is achieved by getting the right amount of care to those with medical needs. Providing excessive services or inadequate services, which are characteristics of the market model, impairs quality of care for everyone. An exception is that beneficial elective services for the affluent may have a shorter queue in a system of excess capacity, but is that small perquisite for the affluent really worth the tradeoff? And, finally, as demonstrated, cost effectiveness is dramatically diminished in a market system with excess capacity.
A single payer system of reform has a goal of providing high quality, comprehensive care for everyone while controlling excess health care inflation. An important mechanism is to establish a global budget for the entire system. Within that budget, a separate budget is established for capital improvements. The funds for capital improvements are allocated in a manner to achieve, as close as possible, a proper level of capacity for everyone. This is the mission of a publicly administered program but can never be the mission of an entrepreneurial medical marketplace.