Mercatus Center wins 2020 North American Liberty Award for work on Certificate-of-Need requirements

The Mercatus Center at George Mason University in Virginia has won the 2020 North America Liberty Award for their Equity Initiative for American Healthcare. Since 2016, the Mercatus Center has been researching and disseminating their findings on certificate-of-need (CON) requirements. CON laws force private healthcare providers to seek approval from state regulators to expand or purchase new equipment. Originally implemented in the 1960s and 1970s to prevent wasteful spending, CON laws have resulted in fewer healthcare services with lower quality and higher prices. The Mercatus Center will receive a prize of $30,000 to continue their good work to increase human flourishing in the United States.

“CON laws require healthcare providers wishing to open or expand a healthcare facility to first prove to a regulatory body that their community needs the services the facility would provide,” said Matthew Mitchell, director of the Equity Initiative at the Mercatus Center. “This process includes allowing incumbent businesses to protest applications for new entrants who are seeking a new certificate-of-need, effectively allowing incumbents to help block potential competitors from building new hospitals, providing new MRI machines, offering new healthcare services, etc. The regulations are typically not designed to assess a provider’s qualifications or safety record.”

The Mercatus Center assembled a team to analyze CON laws throughout the United States, measure their effectiveness, and offer alternative systems that would allow consumers and providers—not the government—to determine the supply of healthcare goods. They then conducted peer-reviewed research projects that addressed each of the fundamental claims that CON law proponents made in their defense. The team was sure to ground their research in the assumptions of CON law advocates to avoid partisanship and provide rigorous data.

“The process for obtaining a CON can take years and can cost tens or even hundreds of thousands of dollars in preparation costs, hindering competition and innovation, and limiting services available to patients in need,” Mitchell continued.

In 2017, Mitchell and fellow Mercatus scholar Thomas Stratmann developed an innovative state-by-state analysis of CON laws and their impact on local healthcare markets. Each state profile includes a report that explains how CON laws affect hospital quality, total healthcare spending, access to healthcare facilities, and estimates how they would change if the laws were repealed. Despite well-funded opposition, the Mercatus Center’s research has inspired numerous reform efforts across the country, with 11 state legislatures introducing bills to reform CON laws in the past year alone.

In Florida, Mitchell was invited to testify in the state house where he briefed reform-minded legislators on his research. Within a couple of months of Mitchell’s testimony, the Florida House passed a bill to significantly cut CON requirements for general and specialty hospitals and eliminate them entirely for more than a dozen medical procedures. The legislation was signed into law by Governor Ron Desantis in July 2019.

Soon after Florida passed their law, Michigan followed suit. The Michigan state regulators decided a short time beforehand to impose a new certificate-of-need requirement on experimental cell therapy for cancer treatment. The regulatory overreach—established despite a growing body of research that reveals the real costs of CON laws—quickly created a state-wide uproar and forced the regulators to reverse their decision. The controversy inspired the introduction of a comprehensive reform package, informed by Mercatus research, that would overhaul the way all CON laws restrict healthcare in the state. The package is currently making its way through the state legislature.

“The Michigan Senate passed a package of four separate CON reform bills, and now they are under consideration in the House,” explained Mitchell. “The House Health Policy Committee held its first hearing on the bill package in mid-July.”

The Mercatus Center plans to continue their research on CON regulations and to demonstrate how these laws affect patient access, quality, and cost, highlighting the burdens they pose on healthcare patients and providers. With 11 states currently considering legislation to roll back their CON requirements, Mercatus anticipates further reforms will follow. “There are ongoing discussions in several states, including Alaska, North Carolina, Tennessee, and Georgia,” Mitchell concluded.

To read more about the project, click here.

To read Mercatus' latest study on CON laws and how they impact rural communities during the pandemic, click here.

The North America Liberty Award is generously sponsored by Templeton Religion Trust.