Certificate of Greed

President Donald Trump seems to enjoy consistent support from a relatively steady portion of the population. My completely unscientific analysis, though I did ponder this statement deeply for a minute while wearing a cardigan sweater and stroking my professorial beard, breaks his persistent fans into two groups.

The first seems to be characterized best as the ‘poke ‘em in the eye’ crowd. When the president jabs the establishment, whoever that is, they love it because they get to enjoy the visceral reaction flowing from their personal frustrations.

The second group, however, tolerates the antics in exchange for getting tangible policies and executive actions consistent with what they believe is best for the country. Supreme Court justices and border security are two such examples.  Another thing frequently cited by this group, even though it gets far less media or Twitter attention, is Mr. Trump’s pro-market approach to deregulation.

Of particular note to independent physicians is the administration’s quiet campaign against Certificate of Need (CON) laws. You might’ve missed this because ‘quiet campaign’ is not what you typically expect from the president and it is a bit beyond his direct power since CON regulations are set at the state level.

But, in a broad, sweeping report to the president last December about how to fix the healthcare system, three of his cabinet secretaries took very specific aim at the anti-competitive effects of the increasingly anachronistic CON scheme.  Now, some state legislators are taking up the banner in trying to get these scaled back, if not repealed entirely.

Recall that CON laws came about in the late 1970s in response to an ill-fated cost containment measure from the Nixon administration (thanks Tricky Dick). Mr. Trump’s pro-market predecessor, Ronald Reagan, repealed that federal mandate in 1986 as evidence was already mounting that the idea was causing more harm than good. Here we are, over 30 years later, and only 15 states have eliminated the CON laws. As a westerner, I am happy to note that the vast majority of the states that actually welcome real competition are located out here on our side of the country.  Cowboy up.

The report to the president lays out the evidence that all this idea has accomplished is the protection of large regional health monopolies that increase cost with no demonstratable improvement in quality or the amount of charity care delivered.

We have been discussing the importance for independent physician practices to become a care delivery platform. While not always the case, when you can expand to include facilities, you open new opportunities that make your platform is stronger and more sustainable. CON laws generally function to protect established hospital systems and limit options for physicians. That is just reality and it is wrong.  If you care about your independence, this issue likely matters to you.

Practical Economics

There is a battle going on in our house to win the decisive third vote.  Our oldest daughter is a social justice advocate who is an art major.  Our son is a libertarian getting a finance degree.  Were he the type, he might be the first person in the world to get a ‘Creative Destruction Rocks’ tattoo.

Both are after the support of the youngest so they can control the dinner table discussion.

She has been leaning conservative since riding to school with her brother for years, listening together to country music, sound track of the Red State South, but earlier this week, she got her first official paycheck and the fat lady sang.  It is over.  She firmly joined forces with our son when she looked at her pay stub and shouted, ‘Why is the government taking all of my money?’

Another similar practical economic debate is happening on at a bigger scale around certificate of need (CON) laws, something that goes to the heart of your beliefs about government vs. markets.

These state laws, which require government approval before certain healthcare facilities can be built; certain services added; or certain expensive equipment purchased; were intended to ensure an adequate supply of resources, particularly for rural communities and the poor; improve quality; control costs; and encourage hospital substitutes like ambulatory surgery centers (some of you snickered on that last one).

Were they yet up to speed on healthcare economics (I am working on it), my two youngest would point, victoriously and probably a bit too smugly, at a pile of data suggesting CON laws have had the opposite effects of these stated goals. 

We bring this up because West Virginia and Florida have introduced bills to repeal their CON laws.  New Hampshire shed theirs last year, bringing to 15 the states that have dropped it since the federal government repealed the CON mandate in 1986.

Positions on this overly complex process (heads nodding vigorously from any readers who have ever had to endure a CON application) essentially comes down to two points of view. 

Incumbent hospitals, the primary defenders of CON laws, say that without this protection, greedy capitalist pigs (that is you physicians partnering with some money folks…together, the very definition of the triple redundant ‘greedy capitalistic pig’ phrase) will cherry pick their profitable business and they will then go belly up, leaving no one to take care of Grandma’s gall bladder.

Opponents of these laws claim CON’s restrict innovation and competition, and suggest, none too subtly, that hospitals simply use the CON process to protect their monopolies.  And then they point to all that data about higher cost, less access and no improvement in quality.

Speaking of data, states that are exploring the elimination of CON laws generally couple that with increased cost and quality reporting requirements.  Increasingly, transparency to aid consumer’s in their decision making is seen as a better form of control than a government approval process. 

And the two young Coan kids shouted, ‘Amen.’