Raise the bar for the next pandemic

As state leaders contemplate allowing people out of their houses and back to work, we are only beginning to measure the extraordinary costs of flattening the curve. The costs are more than the 4.8% first-quarter decline in GDP, or the pain befalling the 18% of the American workforce who have filed for unemployment. They also include tens of thousands of missed or delayed cancer diagnoses as patients skip “nonessential” trips to the doctor. And, of course, there is the psychological toll of isolating a social species. To paraphrase Adam Smith, there is much ruin in a nation on lockdown.

Is there another way? For the next pandemic — or perhaps for the return of this one in the fall — we should try to raise the bar and not just flatten the curve. That is, increase our health care system’s capacity to handle a spike in demand. One way to start is by eliminating state certificate-of-need, or CON, laws. Our new analysis, co-authored with James Bailey of Providence College, shows that among the 27 states that apply these arcane laws to hospital beds, projected shortages of intensive care unit beds over the course of the pandemic are more than twice as likely and are projected to be more than 16 times larger.

What exactly are these laws? In some states, a health care provider hoping to open or expand a facility must first obtain a certificate of need by proving to a regulator that her community needs the service she plans to provide. The process can take months or even years and can cost tens or even hundreds of thousands of dollars in compliance and opportunity costs. Controversially, established providers are invited to oppose the applications of their would-be competitors.

The details vary from state to state. In most, a CON is required for a new hospital. In many, it is needed for a mental health facility, a substance abuse clinic or a CT scanner.

The aim is to limit health care costs. But the balance of evidence from 20 peer-reviewed studies over several decades shows that, if anything, they are associated with higher costs and more spending. And while regulators often claim that these rules protect patients, research suggests that health outcomes are actually worse in CON states.

The most-studied aspect of CON laws is also the most important in 2020: Their effect on health care capacity. Researchers find that CON laws are associated with 30% fewer hospitals and 14% fewer ambulatory surgery centers per capita. They also find that they are associated with fewer: Rural hospitals and rural ambulatory surgery centers; hospital beds; hospice care facilities; dialysis clinics; and hospitals offering MRI, CT and PET scans. In CON states, patients must drive longer distances to obtain care, and there are greater racial disparities in the provision of care.

When the crisis hit, 27 states (and the District of Columbia) required providers to obtain a CON before acquiring hospital beds. Many required a CON even to relocate beds from one facility to another. According to our research — which builds off of ICU bed shortage projections from the Institute for Health Metrics and Evaluation — among those states with no CON requirement for hospital beds, the odds of an expected shortage are 13%. But among CON states, the odds are 30%.

Shortages also look to be more severe in CON states. The average non-CON state is expected to experience a shortage of 114 ICU beds (a little more than 0.5 beds per 10,000 residents) over the course of the pandemic, while the average CON state is expected to experience a shortage of over 8,000 beds (about 9 per 10,000 residents).

Twenty-two states have relaxed or suspended their CON laws to help health care professionals respond to the crisis. Unfortunately, these efforts appear to be too little, too late. These temporary moves seem to have no statistically significant effect on projected bed shortages. This makes sense, as it can take weeks if not months to acquire medical equipment.

COVID may be back in the fall. If and when it returns, it may be easier to raise the capacity bar than to flatten the infection curve. One way to do so is to eliminate certificate of need laws.

Matthew D. Mitchell is a senior research fellow and director of the Equity Initiative at the Mercatus Center at George Mason University. Thomas Stratmann is a senior research fellow at the Mercatus Center and a professor of economics and law at George Mason University.