Hospitals Should Be Free To Improve Medical Services
Suppose an Ohio hospital wants to purchase a new Magnetic Resonance Imaging (MRI) machine or wants to add more beds to its maternity or obstetric unit. Or suppose a new cardiac catheterization lab wants to open. In Ohio, these health care improvements would be prohibited.
In the debate over health care, virtually all sides agree that medical services in this country are not available to enough people, especially the middle class and poor. So, why is the state preventing the expansion of health care services to more citizens? Many health care experts believe limiting the ability of health care facilities to expand is necessary to prevent costly oversupply and so-called “duplication of services.” But by restricting the supply of services, the regulations in fact limit consumer choice and increase the ability of the health care providers to raise prices above competitive market levels.
Certificate of need regulation requires that many new medical services receive a license, called a certificate of need, before being established. In fact, a moratorium currently exists on new certificates for several useful medical services: MRI Unites, cardiac catheterization units for low-risk patients, and obstetric and newborn care beds, among others. It is now clear that these regulations have not lowered health-care expenditures or improved quality. University of Minnesota economist John A. Nyman found such regulations contributed to greater market concentration and higher prices for nursing home care. An economist at the Federal Trade Commission, Keith B. Anderson, surveyed 15 academic studies and found these regulations were ineffective in reducing health care costs.
While federal rules mandated certificate of need regulations in
1974, the rules were repealed in 1986. Over a dozen states subsequently
eliminated certificate of need review entirely. Last November,
the Ohio legislature had an opportunity to follow this trend by
allowing certificate of need regulations to expire. Instead, in an
emergency measure passed by the lame duck legislature, the state
renewed regulation until May 1. State officials expect an even
stronger, longer lasting bill will be introduced this spring.
State legislators, instead, should allow this regulation to expire on May 1. If the new legislature succumbs to the special interest in the health-care industry and passes a new bill, Governor Voinovich should veto it. Terminating certificate of need regulation will increase the availability of medical services, lower costs, and increase the quality of health care for all Ohio consumers.
Robert A. Lawson, Ph.D. is Professor of Economics and George H. Moor Chair at Capital University in Columbus, Ohio and a Senior Fellow with The Buckeye Institute.
