Alabama Certificate of Need Laws Could Halt Development of Multi-Specialty Facility

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Alabama is one of 35 states that have Certificate of Need (CON) laws on the books. These outdated laws increase health care costs, limit competition for new facilities attempting to enter the market, and reduce access to care for patients.

According to a Mercatus Center report, Alabama could reduce total health care costs by $203 per person if these outdated laws were repealed. Other than increased costs when CON laws are enforced, barriers to competition also result in diminished health outcomes. And while $203 may not seem substantial, in many rural communities – like those in Alabama – those are real dollars that can and should be earmarked by families for other pressing needs.

Currently, the city of Fairhope is looking to build a new multi-specialty surgery center on a donated 8-acre site near the University of South Alabama.

After the announcement of this development, Infirmary Health Systems challenged the CON law permit for the development. Clearly, unnecessary CON laws limit health care innovation and create barriers to entry for new facilities. CON laws are often used as a protectionist measure to limit competition, which results in fewer options for patients. According to a recent study, states operating with CON laws have a 5.5 percent higher mortality rate than those that operate without. Moving forward, a full repeal or even reform of these laws, would not only lower costs, but save lives.

Dr. Mark Nix, president and chief executive officer of Infirmary Health, said the new center would disrupt the existing health care system in Baldwin County and would have a negative financial impact on Thomas Hospital.

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“Thomas Hospital has served the medical needs of central Baldwin County for over 60 years. Along with all the existing health care providers in this county, Thomas Hospital has demonstrated a significant financial commitment to all residents of Baldwin County, regardless of their individual financial status, by expanding medical services and enhancing access to quality health care to all,” Nix said. “The potential dilution of surgical cases at Thomas Hospital and the three existing free-standing ambulatory surgery centers, all located within 10 miles of the proposed USA facility, would have a long lasting and detrimental impact on the existing health care providers in the county and will impede their ability to provide future needed services as the county grows.”

Similar to all industries, the health care sector is not and should not be exempt from the positive and innovative effects of competition. Health care improves when competition leads to innovation and greater access to quality care. The United States health care industry is one of the best in the world because of its roots in free-market policy, not burdensome regulatory measures that discourage innovation, which invariably leads to protectionism of current facilities in the market.

Alabama is experiencing the unintended consequences of CON laws. A proposal for a new surgery center that would bring specialists, and new technological advancements to patients in the community, is stunted by CON laws.

Yet community support is unwavering; after news of the new development, the community organized a petition drive to endorse plans for the center. As of November 3, the petition had 3,259 signatures.

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Similar to all industries, the health care market improves when competition is robust. Repealing Alabama’s CON program would put an end to the burdensome and unnecessary regulations that hinder the state’s health care market. Not only would costs be reduced, but lives could be saved.

Christina Herrin ([email protected]) is the government relations manager of Health Policy at The Heartland Institute, a non-partisan, free-market think tank headquartered in Arlington Heights, Illinois.

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