Repeal state law that undermines health care
In an already appropriately and highly regulated industry, Tennessee’s certificate of need (CON) law requires health care providers to obtain approval from the state before adding or expanding health care facilities, services, or equipment.
The law empowers state bureaucrats, rather than patients’ needs, to determine what health care services are available and prevents providers from offering care they otherwise would.
Tennessee’s CON regime is costly and unnecessary. Medical professionals must meet rigorous educational, licensing, and quality of care standards.
Tennessee’s CON scheme acts as an unnecessary additional barrier for health care providers to treat patients in the Volunteer State. Licensed medical professionals in good standing who can provide high-quality care should be able to do so without having to convince the government — and competing providers — that their services are “needed.”
Why these types of health care laws are no longer needed
Americans for Prosperity Foundation recently published a report analyzing the impact of Tennessee’s CON law on health care investment. AFP Foundation finds that from April 2000 to October 2023, Tennessee’s CON program denied nearly $1.5 billion in proposed health care investment.
The stated purpose of the CON law is to promote “access to necessary, high quality, and cost-effective services for the health care of the people of this state.” However, a large and growing body of research indicates CON laws fail to achieve those goals. Compared to states without CON laws, states with CON are associated with higher health care spending, fewer medical facilities, and inferior patient outcomes.
The Tennessee General Assembly passed the CON law 50 years ago under a federal mandate requiring states to establish CON programs in exchange for federal health care funds. At the time, lawmakers believed they could control rising health care costs by preventing redundant services in a proximate area. However, Congress lifted the mandate in 1986 after CON laws proved ineffective. More than a dozen states have since repealed CON; however, Tennessee’s CON regime persists.
The CON scheme pits providers against each other to fight for government favor. Rather than appeal to patients, providers must petition the government for permission to care. Consequently, competing providers commonly oppose each other’s CON applications
and even litigate the state’s decisions to approve or deny a project in court. These disputes can sometimes take years to resolve and cost hundreds of thousands of dollars, diverting resources from patient care and delaying deployment of new health care provisions.
Lawmakers should focus on lowering prices, improving care
In 2021, the General Assembly made more than 30 reforms to the CON law to make it less restrictive. Many of those reforms are arbitrary. For example, providers in smaller counties must obtain a CON to develop MRI services. But providers in counties with a population above 175,000 can do so without a CON — unless they expect to perform more than five scans annually on patients 14 years old or younger, then a CON is required.
These piecemeal changes and convoluted carveouts highlight the inefficiencies inherent to Tennessee’s CON regime. Last year, South Carolina eliminated CON requirements for all facilities and services except for nursing homes and home health agencies. In the months since, lawmakers there say CON repeal has been a boon for health care investment.
The true cost of CON over the last quarter-century is even greater than the $1.5 billion reflected on denied CON applications.
Prohibitive application costs, miles of red tape, and the threat of competitor opposition preclude many providers from ever applying. The Beacon Center of Tennessee finds that the number of CON applications has fallen by more than 70% over the last 20 years. So much lost health care investment means Tennesseans pay higher prices for less access and lower quality health care.