Questions surround Certificate of Need laws and their impact on Mississippi healthcare

Opinions split on whether or not changing Mississippi’s CON laws could be a positive for healthcare providers, patients, and the marketplace.

Across America, Certificate of Need programs (CON) have been used to regulate resources within the healthcare industry. These laws or programs are tools by which states require hospitals and healthcare system providers to prove a community need before opening a new facility or expanding in an area.

Mississippi is one of those 35 states that utilize CON programs. Statutes in the state oversee facilities such as hospitals, long-term care facilities, ambulance services, rehabilitation facilities, and home health agencies. The CON laws also can be triggered when providing services like clinical health, medical equipment supply, relocation of a healthcare facility, change of ownership of facilities or equipment, and expenditures such as the purchase of a building or land.

The Mississippi State Department of Health (MSDH) is responsible for review and approval of CON applications. In Fiscal Year 2022, MSDH reported reviewing 20 applications within the CON program, authorizing $160 million in capital expenditures.

According to the 2022 State Health Plan, CON policies aim to improve the health of residents, increase accessibility, acceptability, continuity and quality of health services, prevent unnecessary duplication of health resources, and provide cost containment.

However, opinions are split as to whether or not the current CON laws actually increase accessibility and lower prices.

State Rep. Lee Yancey says reforming Mississippi’s CON laws could increase doctors and healthcare providers. However, MHA President Tim Moore worries new healthcare companies will absorb the majority of insured patients, leaving large hospitals to treat only Medicare and Medicaid patients.

Efforts to reform CON laws

“It is anti-competitive,” said State Representative Lee Yancey (R).

Rep. Yancey has attempted to pass legislation over the last several years to reform CON laws or do away with them altogether. The effort, he says, has barely made it past committee.

Originally passed in 1974 by Congress, the National Health Planning and Resources Development Act required states to implement CON requirements. This was done to control federal funding. At the time, Louisiana was the only state that did not implement the program.

The decision from Congress came after efforts were made in New York during 1964 to regulate healthcare costs. But in 1986, after nearly every state had implemented a version of a CON program, the federal government repealed the mandate. Through the 1990’s, many states including California, Colorado, Idaho, Texas, Utah and Wyoming began to do away with the programs.

Research conducted by the Mercatus Center at George Mason University in 2016 suggested that CON laws have not provided better healthcare services. GMU professor Thomas Stratmann and his co-author Jake Russ, found that CON programs are associated with a more limited supply of hospital beds and medical imaging equipment.

In 2020, the National Library of Medicine (NLM) reviewed 90 articles to determine the effectiveness of CON programs. The results were mixed.

“The literature provides mixed results, on average finding that CON increases health expenditures and overall elderly mortality while reducing heart surgery mortality. Our cost-effectiveness analysis estimates that the costs of CON laws somewhat exceed their benefits, although our estimates are quite uncertain,” the review stated.

While there was no definitive conclusion reached, the NLM said their review showed that the cost of CON exceeded its benefits and when it comes to hospitals, it also had no impact on health costs overall.

Mississippi still heavily regulates its healthcare industry even as other states have begun to pull back on their CON laws.

“I’ve been trying to find a way to crack the ice to get some more competition in healthcare. We have a paradigm in healthcare that seems to be failing across the state,” said Rep. Yancey.

He said CON programs prevent the availability for the patient to have more choices. At times this forces residents in rural communities to travel great distances for care. He said Mississippi’s need for outpatient type facilities is continuing to grow.

Rep. Yancey believes it is ultimately the market and the consumer who should decide where they receive care. He says allowing more competition will provide a better product and more competitive market pricing.

“My job is not to make sure that hospitals have no competition; it is to make sure that my constituents and those around the state are going to have the best quality healthcare they can get that is close to them and affordable,” said Rep. Yancey.

If Mississippi were to make adjustments to current CON laws, Yancey said there could be an increase in local doctors in rural towns as well as partnerships among physicians in smaller communities.

“We have to look at things differently than we have in the past,” Yancey said. “Doing them the same old way is not going to work. We’ve seen that.”

Mississippi Hospital Association supports CON laws

While Tim Moore, President of the Mississippi Hospital Association, echoed the sentiment that the healthcare system has to change, his perspective on CON programs differed from Rep. Yancey.

The major concern for hospitals regarding an unregulated market of healthcare facilities, is revenue to keep them all operational. Moore said there are worries among established hospitals that if these private health companies begin to pop up across the state, they will absorb the majority of insured patients. This could leave many large public hospitals, with heavy administrative overhead, to treat only Medicare and Medicaid patients.

Hospitals seeing patients on Medicare or Medicaid receive reimbursements largely provided by federal funding. The Medicaid rate is roughly 88 cents on the dollar. Moore said if hospitals are not being reimbursed proportionately to the care being provided, this could lead to devastating impacts for the public as a whole.

“When federal funding makes up a large portion of a hospitals funding, any disrupter to that system can be a big deal. It could mean the difference in staying open or closing,” said Moore.

Moore did voice support for some efforts to revise these programs so that established hospitals and facilities could grow or expand without the risk of losing certification.

States like Louisiana have recently made agreements with the Centers for Medicare and Medicaid (CMS) for a new payment model. This returned roughly $900 million to their hospitals. The new model, which went into effect in 2022, increased hospital supplemental payments. It also prioritizes maintaining adequate funding for safety-net hospitals without additional state funds.

Moore said when Mississippi officials went down this path to try and bring the same relief to the state’s hospitals, they found that the commercial rates were actually lower than the Medicaid and Medicare reimbursement rates. This number matters because of how reimbursement rates are set.

In a conversation with Commissioner of Insurance Mike Chaney, he explained that in Louisiana’s decision they chose to take an average of Medicare and Commercial rates as their reimbursement for Medicaid. He added that the commercial insurance rate in Louisiana is roughly 25 percent higher than Mississippi’s. This prevented Mississippi from moving in the same direction, because those averages did not compare to Medicare, which is considered the “gold standard” of reimbursements. Therefore, Mississippi continues to use Medicare as the benchmark.

What’s to come?

Rep. Yancey and others who support rolling back CON laws could make another run at offering reforms in the 2024 legislative session. Hospitals and healthcare will likely be front and center when lawmakers return to the Capitol in January as more facilities are announcing plans to restructure and various systems consider layoffs.

Lawmakers did provide $103 million in grant funding during the 2023 session to support hospitals. That program has been under scrutiny as some systems have complained that the appropriated funds have not been as accessible as intended. Lt. Governor Delbert Hosemann has said that lawmakers will take a look at the program when they return.