Why Limit Health Care Competition?

West Virginia goes out of its way to block health care competition. Investors cannot open skilled nursing homes, launch opioid treatment programs, expand long-term care facilities or add residential beds for people with intellectual disabilities anywhere in the state.

Strict moratoriums criminalize all of these economic pursuits, even when doctors line up their own funding. Other health care projects are possible, but most entrepreneurial activity cannot move forward in West Virginia without a government permission slip called a “certificate of need” or CON.

Getting the piece of paper is not easy. Applicants must demonstrate a need for their services, meaning they must prove to the state’s satisfaction they won’t take market share from established providers.

If a startup threatens the status quo, then industry insiders can rally to squash the competition before it begins. West Virginia sanctions this interference. State law allows established providers to participate in the CON application process, giving them an official platform to sabotage potential rivals.

Business leaders in other industries would love similar veto power. The Home Depot could stop mom-and-pop hardware stores from opening nearby. Planet Fitness could block smaller gyms. And McDonald’s could push away rival burger joints.

Even when investors clear the CON hurdles, the process wastes time and money. “Conning the Competition,” a nationwide report from our public interest law firm, the Institute for Justice, shows West Virginia CON applicants must pay up to $35,000 and wait two months or longer for government approval.

The report also documents an expansive CON regime in West Virginia unseen in many parts of the nation. California, Texas and 10 other states — representing about 40 percent of the U.S. population — completely repealed their CON laws years ago. Ohio, Indiana and Montana apply CON requirements only to long-term care facilities, and Arizona targets only ground ambulance services.

West Virginia, in contrast, targets just about everything. No other state maintains a moratorium on opioid treatment programs. And few other states enforce CON requirements in more categories of care. Until recently, West Virginia hospitals even had to navigate the entire CON process just to add ventilator services.

COVID-19 prompted 24 states and Washington, D.C., to adopt emergency measures, suspending their CON requirements during the early weeks of the pandemic. But West Virginia refused to budge.

The state passed its CON law in 1977, meaning government bureaucrats have been picking winners and losers in health care for nearly 50 years. The protectionism runs deep, but state lawmakers took a step toward leveling the playing field with Senate Bill 613.

The measure, which Gov. Jim Justice signed on March 28, scales back some of West Virginia’s most onerous CON requirements. The new law exempts birth centers, for example, allowing service providers to create these niche facilities without begging the state for approval. The law also allows hospitals to add services without a CON, and increases the expenditure threshold for requiring a CON from $5 million to $100 million.

Entrepreneurs will benefit from lower barriers to entry. Health care professionals will benefit from expanded job opportunities. And patients will benefit from increased consumer choice.

Ultimately, the entire economy will benefit.

The reform should be celebrated, but West Virginia still has far to go. The ultimate goal should be total CON repeal.

Hospital associations disagree. They claim CON laws are necessary to keep balance in the health care system, preventing redundant investments and reducing waste. Yet federal antitrust agencies debunked these arguments long ago. “By their very nature, CON laws create barriers to entry and expansion to the detriment of health care competition and consumers,” the U.S. Department of Justice and Federal Trade Commission concluded in 2008.

Decades of real-world experience confirm this finding. States without CON laws have more hospitals and surgery centers per capita, along with more hospital beds, dialysis clinics and hospices.

Why would West Virginia try to prevent this type of growth? Rather than artificially restricting health care investment, the state should kill its CON law and expand opportunities for everyone.

Jaimie Cavanaugh is an attorney and Daryl James is a writer at the Institute for Justice in Arlington, Va.

This article was originally published by RealClearPolicy and made available via RealClearWire.