The Cost of CON

I continue to receive a great deal of feedback as a result of my blog posts on the potential deregulation of the Certificate of Need (CON) in Florida, and so I wanted to talk in more detail today about how the removal of this law can affect consumers.

As I explained previously, there is no conclusive evidence that deregulation improves quality, cost or access to health care. In fact, many believe that costs are lower in states regulated by CON, because CON operates on an economy of scale model. Economy of scale in microeconomics is the principle that there is a proportionate saving in costs gained by an increased level of production. Thus, facilities that operate in CON states are more likely to perform a greater number of procedures than their counterparts in non-CON states due to there being fewer hospitals within a given area. Following this economy of scale principle, CON state hospitals can offer their procedures and services at a lower cost due to increased volume.

One of the states that has experienced the negative effects of the absence of a CON law is Texas. Specifically, in the Dallas-Fort Worth market, deregulation has driven up costs and resulted in an oversaturated market of medical facilities and services. In 2013, the Dallas-Fort Worth market was in the midst of an explosion of hospital construction and expansion as well as physician-owned health care businesses. However, despite this fact, health care costs have remained significantly higher than other markets as facilities had to increase prices to cover costs in their flooded environment.  Finally, the region has experienced a proliferation of free standing Emergency Departments, which has not only caused a strain on the medical workforce and finite resources but has also driven up costs.

As I have said before, deregulation of CON remains a vitally important issue affecting all members of our community, especially those that are most vulnerable. I encourage you to remain engaged - repost, tweet and share this discussion. You may also reach out to me directly at JCouris@jupitermed.com and offer your thoughts. I look forward to working on this initiative together.