A battle royal has broken out in West Virginia, pitting free-marketeers against monopolists.
More specifically, it pits enlightened state legislators who seek to remove barriers to access to better health care against health care monopolists who seek to retain market share at the expense of patients, especially the needy.
At the center of the growing debate is Senate Bill 395, sponsored by Majority Leader Ryan Ferns, an Ohio County Republican. His bill would strip the West Virginia Hospital Authority of its only remaining responsibility — taking control of the Mountain State’s “certificate of need” program.
If a hospital wants to open a recent facility or even offer a recent service, it must go to the government and prove there is a need, thus, as the government puts it, “discouraging duplication” in an “orderly, cost-effective manner.”
As the Charleston Gazette-Mail recently reported, a legislative audit found that the certificate-of-need process is ineffective in controlling health care costs and is an unnecessary regulatory barrier.
Of course, hospital officials are vocally disagreeing. Namely, Gregg Warren, a spokesman for Wheeling Hospital in the Northern Panhandle, dusted off tried-and-true, failed, and intellectually worthless arguments in defending certificates of need to The Intelligencer of Wheeling.
“It’s going to hurt employment, it’s going to hurt patient services, it’s going to hurt financial stability,” he said. “If you allow outsiders to come in and open up similar services, it’s going to reduce the number of patients that come to us, (there would be) layoffs, and it’s going to take health care dollars to other states,” where these unwelcome “outsiders” live, Warren said.
Talk about monopolistic demagogy fueled by extreme fear of competition. Ironically, that competition would lower costs and better serve patients.
Those concerns are largely echoed by Angelo Georges, MD, chief medical officer at Wheeling Hospital. He told the newspaper that when there are too many hospitals in an area offering the same specialty services, there aren’t enough patients for each hospital to be proficient in procedures like surgery.
“UPMC, for example, could build a hospital, UPMC of West Virginia,” Georges said, referring to the hospital giant in Pittsburgh, an hour away.
The heart of the problem is revealed again – the panicky fear of competition that may interfere with the state monopoly that prevents competition.
Too much access increases costs for patients, Georges said. But West Virginia already has one of the highest rates of growth in per capita health care spending, a legislative audit found.
Fundamental economics refutes Warren and Georges’ claims. As do the facts.
Ferns’ bill, introduced Feb. 22, is based on a legislative audit, a U.S. Department of Justice report, and research by the Mercatus Center at George Mason University in Fairfax, Virginia.
“The theory is that by restricting market entry and expansion, countries will reduce excessive investment in facilities and equipment,” reads a Mercatus study published in June 2015.
“In addition, many states—including West Virginia—justify CON programs (as they are called) as a way to cross-subsidize health care for the poor. Under these ‘charity care’ requirements, providers that receive a certificate of need are typically required to increase the amount of care they provide to the poor,” the think tank researchers note.
“These programs are designed to create quid pro quo arrangements: state governments restrict competition, raising health care costs for some, and in return health care providers use these artificial profits to increase the care they provide to the poor.”
But in reality this is not what happens, the center said.
“There is no association between CON programs and increased access to health care for the poor,” Mercatus researchers found. But there are sedate implications.
In West Virginia, the number of hospital beds fell by 2,424, the study found, while the number of hospitals offering MRI services fell by 4 to 7 and the number of hospitals offering CT scans fell by 13 to 16, to name just three.
“For people seeking high-quality health care across West Virginia, this means less competition and fewer choices, without increasing access to care for the poor,” Mercatus concluded.
Worse still, a decade ago the Justice Department found that the certificates of need promoted unfair competition between two Mountain State hospitals and enabled collusion between two others.
As a Justice Department lawyer recounted in 2007, the licensing process itself — cumbersome and steep — kept one hospital from seeking permission to offer a competing open-heart surgery program.
And in another case, two hospitals used the CON process to carve up the market for themselves, Justice said. Competition was thwarted to preserve their monopolies.
Department of Justice summary on certificates of need:
“They create barriers to beneficial competition”; “the original cost-control reasons for enacting CON laws no longer apply”; “protecting the revenues of those in power does not justify enacting CON laws”; such laws “impose other costs and may facilitate anti-competitive behavior”; “CON laws lead to less competition and higher prices.”
Justice Department lawyer Mark J. Botti testified succinctly before a joint congressional committee in 2007:
“Let me close by urging you not to accept without careful investigation the claim that eliminating CON laws will cause significant harm to your state. We are unaware of any evidence that states that have eliminated CON laws have suffered such harm.”
In fact, as Botti said, citing a number of studies, “the elimination of CON regulations leads to an improvement in markets.”
Pennsylvania’s certificate of need program ended in December 1996. However, about three dozen states still utilize the CON procedure.
Returning to Senator Ferns.
“We’re talking about a government agency that decides when and where hospitals can spend their money and their investments,” he told The Intelligencer. “Artificially reducing competition by the government leads to poor outcomes. Increasing competition leads to better outcomes and access to care.”
That the West Virginia Hospital Association and its member hospitals openly support these needy outcomes and reduced access is shameful. Some might even consider it a violation of the Hippocratic Oath.
