By Anne Philpot, WPC Research Assistant

A new study from the Mercatus Center at George Mason University indicates that states with Certificate of Need laws offer fewer medical services to patients and limit competition among providers. Certificate of Need laws require medical facilities to prove their need for expansion or new equipment through a lengthy government application process. If the regulatory agency does not grant a certificate, the hospital or health center is legally barred from offering better facilities and new technology to patients. Though original legislation in the 1960s aimed to control costs and subsidize indigent care,[i] the limitations and inefficiencies caused by this centralized health planning system have accomplished neither goal. Instead, health care spending continues to rise at an exorbitant rate despite Certificate of Need laws.[ii] 

The federal Certificate of Need requirement was repealed in 1980, but thirty-six states still have such laws in place. Compared to those without Certificate of Need restrictions, these states have an average of 131 fewer hospital beds per 100,000 persons and substantially fewer hospitals offering MRI services and CT scans.[iii] Though the purpose of state Department of Health Services oversight is to improve quality of care, the level of service doesn’t matter if a patient cannot gain access a hospital at all – because Certificate of Need rules have limited the health resources available. 

The Certificate of Need law has been in effect in Washington state for four decades, creating pointless layers of bureaucracy without reducing costs or improving the quality of care. A 2013 study ranks Washington as tenth highest in the nation in annual costs for physician and clinical services.[iv] 

Similar inefficiencies arise in hospital building projects, causing delays, additional expenses, and increased patient waiting times. The proposal to expand Swedish hospital in Issaquah required more than three years of Certificate of Need processing, all for a medical facility that took only fifteen months to build.[v] Countless patients could have been served by the hospital in these three years consumed by Certificate of Need requirements and without sacrificing quality of care. It is clear these laws have failed their original mission; the only explanation for the state maintaining Certificate of Need is inability of regulators to relinquish control. 

Washington Policy Center analysis, like the George Mason University study, shows Certificate of Need laws fail to help patients, because they prevent providers from adapting to the changing health needs of our communities. Repeal of Washington’s Certificate of Need law would return balanced competition to the health care market, allow citizens to choose providers and, in turn, would create incentives for providers to improve care and lower expenses for everyone. 

For more information on Washington’s Certificate of Need law, see “The Failure of Government Central Planning: Washington’s Medical Certificate of Need Program,” by John Barnes, Washington Policy Center Policy Brief, January 2006.