Health care needs aren't easily measured
The reality of the federal government's mandate for certificate-of-need programs, however, was such a patchwork of programs that the law was repealed 13 years later. Many states—Wisconsin included—no longer require a formal review and approval of large capital expenditure programs in their health care industries.
"The feds mandated it for all 50 states because they weren't able to meet their Medicare and Medicaid budgets," said Rich Gruber, vice president of community advocacy for the Janesville-based Mercy Health System. "They used it as a cost-containment measure.
"But it just didn't work because there were so many different approaches in place across all 50 states."
Gruber said that six to 12 states still have strong certificate-of-need programs, while a handful of others use the program in name only. The rest, he said, have abandoned it.
Wisconsin dropped its certificate-of-need program in 1987. Since 1993, it has had a limited version that primarily reviews and approves nursing homes and other long-term care facilities.
The basic assumption underlying certificate-of-need regulation is that excess capacity, namely overbuilding, results in health care price inflation, according to the National Conference of State Legislatures, a bipartisan organization that serves the legislators and staffs of all 50 states.
Supporters say certificate-of-need programs limit unnecessary health care spending, while opponents argue that they reduce competition and therefore keep prices higher.
Gruber is well versed in the certificate-of-need process. Mercy has tried—and failed—three times to get a permit to build a new hospital and clinic in Crystal Lake, Ill.
"Illinois, I would say, is one of the states that has a very strong CON (certificate-of-need) program," Gruber said.
Studies have demonstrated that cost controls through state policies and certificate-of-need programs don't work, he said.
"Competition in the marketplace is the best way to control costs," he said.
It's ironic, he said, how expensive it is to go through a process that's designed to reduce costs. For example, he said, the filing fee for Mercy to start the Illinois certificate-of-need process was $100,000.
"And I would say that is one of the least expensive parts of it," Gruber said. "It really spawns a cottage industry with all the lawyers and planners that have to be involved."
Alwyn Cassil is director of public affairs for the Washington, D.C.-based Center for Studying Health System Change.
She said the certificate-of-need program was designed as a useful planning tool.
"It's become such a politicized thing," she said. "Providers love it when it's used to keep a competitor out but hate it when they can't get in."
Cheryl DeMars agrees. She's president and chief executive officer of The Alliance, an employer-owned and directed not-for-profit cooperative that helps companies—including several in Rock County—manage their health insurance.
"It seems to be a system that's easily gamed," she said.
There may be no better example of politics and shenanigans in the certificate-of-need process than Illinois.
In 2003, Mercy first announced plans for an $81 million hospital and clinic in Crystal Lake. The proposal moved forward before being derailed when the board overseeing its approval became embroiled in a kickback scandal that involved the Mercy project but not Mercy officials.
Politics aside, DeMars said the original basis for certificate-of-need programs still has merit.
"I get the sense, at least from the business community, that there are some legitimate questions about all of the construction we are getting," she said. "The problem is that there just isn't objective data available to help communities determine what is and isn't needed."