The U.S. health care system is a maze of laws that go largely unnoticed. Costs of services, wait times, and travel distances vary from state to state, but this is by law, not by coincidence. Recently, two laws, the Certificate of Necessity (CON) and the Certificate of Public Advantage (COPA), have combined to create a health care nightmare in Tennessee.
Introduction to the CON method
State CON rules limit the number of providers who can practice in a given area and also limit the amount of equipment those providers can have. While the community at large can usually voice its preference (or lack of preference) for potential new practitioners, existing providers also have a say. Of course, they rarely support new competition, so a fast-growing provider in one of the 35 CON states faces an uphill battle, even when the community clearly needs it.
You’re not alone if you think restricting access to care is a mysterious way to increase access to care. And you’re not alone if you think stifling competition leads to lower quality services. Economic theory and decades of statistics show that CON laws are a failure.
COPA Allowance
Healthcare organizations that want to merge into a monopoly can do so legally if they operate in one of the 19 states that grant COPA authorization. In exchange for government permission to merge, the newly created healthcare giant agrees to follow certain government rules ostensibly designed to offset the typical problems that arise from monopolies.
Not only would overseeing these hospitals require significant national resources, but the pros and cons of a monopoly would be impossible to balance perfectly: monopolies have the money, time, and power to manipulate new conditions to their advantage. Moreover, once the stringent COPA rules that bind monopolies expire, healthcare giants will have all the power, with no restrictions whatsoever.
Both ends are tied
COPA and CON laws give powerful government lobbyists an unfair legal advantage over their competitors, and both provide examples of how governments blatantly pick winners and losers. Recently, Tennessee demonstrated what can happen in states with both types of laws.
Ballad Health exclusively operates 20 hospitals covering 29 counties and more than 1 million residents in the Appalachian region of Tennessee and Virginia, and gained its monopoly through a COPA granted by the state of Tennessee. Previously, the region only had two hospitals to choose from, but Ballad consolidated the remaining two into one. In exchange for this benefit, the company agreed to adhere to minimum charity care requirements and other guidelines intended to offset its monopoly.
The company immediately terminated the contract.
Ballard offered an average of $37 million. few Ballad Hospital pays more than $100 more per year than required for charity care (though it continues to file lawsuits against patients who don't pay their bills). It also failed 80 percent of the state's tests designed to monitor compliance with COPA. Emergency room wait times have nearly tripled, reaching an average of 11 hours. Despite this, the Tennessee Department of Health continues to give Ballad Hospital near perfect scores on its reports, and Ballad Hospital has not faced any penalties.
Meanwhile, the company's annual net income has soared from $63 million to $143 million from 2021 to 2022. And CEO Alan Levine's annual salary has nearly doubled since the merger.
Because this fiasco occurred in Tennessee, patients also face the added pressure of CON laws that allow competitors to shut out new businesses. Potential new businesses can easily see the need for services in an area, but they can't help it unless they get a license to open.
Sixteen hospitals have been closed since 2010 and the government needs to be persuaded to build new ones.Ballard Health— that their services are needed. And because Levin sees the Ballard merger as a “great success,” it seems unlikely he'll see a new competitor as a “need.”
Tennessee and Beyond
Tennessee patients are facing dire circumstances, and they are not alone in their vulnerability. Both types of laws harm patients, but having both makes the problem worse, and 14 states have both COPA and CON. Residents must make it clear to lawmakers that they will not tolerate their health care being held hostage, or the system will never get better.
