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DOJ, FTC throw their weight behind Alaska bill to end certificate-of-need

Department of Justice's Antitrust Division and the FTC have recommended that Alaska repeal its certificate-of-need law in an April 12 letter.

Susan Morse, Senior Editor

Alaska Capitol Building-Juneau. Photo by <a href="http://www.alaska.org/detail/alaska-state-capitol-building"> Alaska.org </a>Alaska Capitol Building-Juneau. Photo by Alaska.org

The Department of Justice and the Federal Trade Commission have thrown their combined support in favor of an Alaska Senate bill that would repeal the state's certificate-of-need mandate for providers that want to expand facilities or services.

The federal agencies have long supported ending certificate-of-need requirements in states saying they act as barriers to competition.

The Department of Justice's Antitrust Division and the FTC have recommended that Alaska repeal its certificate-of-need law in an April 12 letter of support.

When first enacted, the letter said, certificate-of-need laws had the laudable goal of reducing healthcare costs and improving access to care.

[Also: Lawmakers in Alaska eye GOP bill failure, future of reform as they struggle to stabilize insurance marketplace]

"Alaska lawmakers have the opportunity to bring lower costs and greater options to healthcare consumers," said Acting Assistant Attorney General Andrew Finch of the Antitrust Division.  "CON laws can increase the costs of investing in new healthcare services and can shield incumbents from competition."

"CON laws raise considerable competitive concerns and generally do not achieve their alleged benefits for healthcare consumers," said Acting Chairman Maureen K. Ohlhausen of the FTC. "CON laws can restrict entry and expansion, limit consumer choice, and stifle innovation.  Additionally, the CON process can be exploited by incumbent firms to thwart or delay entry by new competitors, as well as potentially obstruct efforts to restore competition lost to an anticompetitive merger, harming free markets and consumers."

Certificate-of-need laws, established in 1974, require providers to get state approval and show a public need before establishing a new service or healthcare facility. With the latter, the idea is to limit prices by capping capacity.

"The basic assumption underlying CON regulation is that excess capacity stemming from overbuilding of healthcare facilities results in healthcare price inflation," the National Conference of State Legislatures said last year.  "Price inflation can occur when a hospital cannot fill its beds and fixed costs must be met through higher charges for the beds that are used."

[Also: Minnesota the best state for healthcare, Alaska the worst, WalletHub says]

The Antitrust Division of the DOJ said the law helps healthcare organizations limit competition in a geographic area.

Proponents say that because certificate-of-need limits the number of hospitals, providers improve their skills by treating a larger number of patients. However, a study released last year for the Mercatus Center at George Mason University said there's no evidence to show CON laws improve hospital quality.

Despite the recent introduction of legislation in half a dozen states to end certificate-of-need, most bills have gone nowhere.

Since 1987 when the mandatory law was repealed, 14 states have discontinued their programs. It remains on the books in 34 states and the District of Columbia.

Under the CON program, a party must obtain a certificate of need before spending $1.5 million or more to construct a healthcare facility, alter the bed capacity of a healthcare facility, or add a category of health services.

Healthcare facilities include hospitals, independent diagnostic testing facilities, skilled nursing facilities, and ambulatory surgical facilities.

In Alaska, Senate Bill 62 would repeal the state's CON program effective July 1, 2019. 

Twitter: @SusanJMorse

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