WASHINGTON (March 25, 2020) – The R Street Institute applauds the introduction of the Increasing Hospital Capacity to Fight the Coronavirus Act of 2020. Introduced Monday by Representative Don Bishop, R-N.C., and cosponsored by Representatives Jim Banks, R-Ind., and Ted Budd, R-N.C., this bill would reduce federal regulatory barriers that prevent states from increasing healthcare capacity and allow them to better respond to the Covid-19 crisis. The members also rightly call on all states to waive certificate-of-need (CON) laws for the duration of the pandemic.

Under current law, states can face penalties for suspending their CON laws, which are state-level laws that require providers to obtain regulatory approval before increasing capacity. Suspending these laws allows states to increase their capacity to treat patients in a variety of ways. As Bishop’s release notes, “North Carolina suspended its CON laws on March 12 in order to add hospital beds without seeking regulatory approval.” Indeed, North Carolina’s pernicious CON laws have prevented doctors from providing more affordable MRI scans to patients.

CON laws are no more than a “competitor’s veto.” They require new businesses to apply for a certificate. Existing companies in the same field have the opportunity to object to those new businesses. If they do, the person hoping to start a new business must prove that there is a “public need” for it. This is made worse by the fact that these laws often apply to the health sector.

“The U.S. Federal Trade Commission and the Department of Justice, and several academic studies found that by eliminating competition, CON laws actually drove up costs, lowered quality, and limited the availability of needed services,” writes Christina Sandefur. “As the American Medical Association succinctly put it: ‘CON laws represent a failed public policy.’”

As Matthew Mitchell of Mercatus writes, “Both economic theory and data accumulated over the last four decades strongly suggest that CON removal will result in greater access to higher-quality, lower-cost care.”

While suspending CON laws now enables hospitals to increase their number of hospital beds, suspending these laws long ago would have been more beneficial.

“Evidence was already mounting that certificate of need laws harm access to care and affordable health care,” says R Street Fellow Shoshana Weissmann. “This legislation is critical to making sure that states won’t be penalized for doing the right thing and doing away with harmful CON laws.”

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