Certificate of need (CON) laws significantly limit the growth of ambulatory surgery centers (ASCs), increasing health care costs and reducing access to care.
That’s according to a recently published study commissioned by conservative think tank The Cato Institute.
The research found that repealing ASC-specific CON laws led to a 44% to 47% statewide increase in the number of ASCs per capita. Rural communities saw even more dramatic growth, with ASCs increasing by 92% to 112% per capita, challenging the idea that CON laws protect health care access in underserved areas.
CON laws require health care providers, including ASCs, to seek regulatory approval before opening new facilities or making significant capital investments. They present a double-edged sword for the industry: While CON laws limit competition by controlling market entry, they also create hurdles for operators looking to grow quickly.
ASC operators have pointed out how a complex and time-consuming approval process, which varies by state, can slow down expansion efforts, especially in high-growth areas.
“What we would like to see is a drop in the cost of health care by providing these outpatient opportunities for patients, whether they’re rural or suburban,” Chase Neal, co-founder, chairman and CEO of SurgNet, told ASC News.
SurgNet Health Partners operates and manages three ambulatory surgery centers in Michigan, Ohio and Alabama.
The CON process dates back to the 1960s, Joan Dentler, founder of health care advisory firm Avanza Healthcare Strategies, recently explained to ASC News, with the intention that such laws would help control the cost of health care if states made people prove there was a need for a given service in their area .
“You had to do this whole application – it’s different in every state – and then get it approved to show there’s no place else people can go to have this surgery, or whatever it may be. It’s not just surgery centers; it’s hospital beds, it’s nursing homes,” Dentler said. “It was about controlling any new health care development, but it was always state by state.”
Today, only 35 states still have CON laws. There are mixed opinions on whether or not CON laws keep health care costs low.
“Based on the available evidence, CON programs appear to have achieved some benefits,” one study published in 2020 found. “However, the costs imposed [by] such programs, including regulatory costs as well as adverse effects on health spending, exceed those benefits by an estimated $302 million a year.”
In states like Georgia, strict CON regulations help protect existing ASCs by preventing market oversaturation, offering strategic advantages. However, in states without CON laws, such as Florida and Texas, markets can become crowded, reducing profitability for individual centers.
But the Cato study challenges that narrative.
“By limiting the number of available ASCs, CON laws not only reduce competition between ASCs but also direct surgeries, many of which are inelastically demanded, to the substantially more expensive hospital setting, increasing healthcare expenditures and burdening taxpayers,” researchers wrote.
The study, which analyzed states that repealed their ASC CON laws between 1991 and 2019, found the restrictions imposed by these laws were not achieving their intended goals.
Instead of protecting rural hospitals from financial strain, researchers said that repealing CON laws improves access to medical care by allowing ASCs to flourish, offering a more affordable, high-quality alternative to hospital-based surgeries.
“Because of cost differences, Medicare typically reimburses providers substantially more for a surgery performed in an in-patient or hospital, relative to out-patient, setting,” researchers wrote. “For instance, Medicare reimburses around $2,900 for a knee arthroscopy performed in a hospital outpatient department compared to only $1,650 for the same procedure in an ASC.”
