FTC/DOJ: Competition is good for health care

Report suggests states reconsider CON

A recent federal report offers what some sources say is the most significant development in years in the ongoing battle over certificate of need (CON) and in what some same-day surgery providers consider to be an unlevel playing field in health care.

The report contends state CON laws are an anticompetitive barrier to entering the health care marketplace. The agencies suggested that instead of reducing costs, there is evidence CON programs actually drive up costs by "fostering anticompetitive barriers to entry."1

Specifically, the joint report from the Department of Justice (DOJ) and Federal Trade Commission (FTC) says states should consider the following steps:

  • Reconsider whether CON programs best serve citizens’ health care needs. "On balance, the FTC and DOJ believe that such programs are not successful in containing health care costs, and they pose serious anticompetitive risks that usually outweigh their purported economic benefits," according to a statement from the FTC.2
  • Consider broadening the membership of state licensing boards, as boards with broader membership could be less likely to limit competition. (For information on how to order the report, see resource box, below.)

Twenty-seven states have CON regulations for ambulatory surgery centers (ASCs).3

Representatives of ASCs and single-specialty hospitals, which often face CON obstacles in getting new facilities approved, have spoken favorably on the report, while representatives of the American Hospital Association (AHA) have reacted negatively.

Here are some specific reactions:

1. Federated Ambulatory Surgery Association (FASA). "Having two federal agencies charged with protecting consumers say that consumers benefit from competition and thus are harmed by CONs will be a major benefit in battles over CONs. Having a neutral party weigh in may shift the balance of power in states that have refused to repeal laws.

"Hospitals argue that they need to be protected from competition; this report suggests otherwise." — Kathy Bryant, executive vice president of FASA, Alexandria, VA.

2. AHA. "Nothing in this report has given us [the AHA] any more confidence that the FTC and DOJ understand the competitive pressures that hospitals face." — Mindy Hatton, AHA vice president and chief Washington counsel.

3. American Surgical Hospital Association (ASHA). "It points out a lot of the concerns for our government and our system in that on one side, you’ve got DOJ and FTC screaming for competition and talking about how great competition is for ASCs and specialty hospitals, and then on the other side, you’ve got Congress adding a provision for moratorium to impede the growth and development of these competitive models. I guess in a way it’s the checks and balances of our system.

"What’s interesting, why this, perhaps, is a more significant document, is that this document is a scientifically prepared report that they’ve put together, based on lot of history and information, that came to the conclusion that competition is good for the future of health care." — Mike Lipomi, MSHA, president of the ASHA, San Diego, and CEO of Stanislaus Surgical Hospital, Modesto, CA.

4. American Association of Ambulatory Surgery Centers (AAASC). "The report is significant for states that currently have CON and for those states that may be considering going back to the use of CON. . . . It reconfirms and repeats the value to consumers and to the cost of health care when competition is available." — Craig Jeffries, executive director, AAASC, Johnson City, TN.

5. Counsel for AAASC and Outpatient Ophthalmic Surgery Society. "I think the report is significant in the sense that it gives some credence to the view that I think people who have tried to develop ASCs over the years have had, that CON programs do not save money, do no promote competition, and indeed often serve as protectors of hospitals and other facilities that are already open. — Michael A. Romansky, JD, partner, McDermott Will & Emery, Washington, DC.

Will the report make any difference?

In terms of the impact, most experts interviewed by Same-Day Surgery are more cautious than optimistic.

"Those who seek approval of facilities in the near future will not find much real solace in terms of results," Romansky says.

All CON programs in operation are operated by state governments, he points out. "There is essentially nothing the federal government can do to mandate that states eliminate or modify their programs," Romansky adds.

However, Romansky reacted positively to the recommendation to broaden the membership of the boards. "The regulators are hospital officials, representatives of the insurance industry, who oftentimes have an interest in keeping competitive ASCs out of market," he says.

Keep in mind, however, that CON is just one piece of the issue, Romansky says. "What we’re seeing now, based on hospital industry lobbying, is a broader attack on ASCs," he says.

"Sometimes, it’s CON program; sometimes, it’s providers’ taxes such as in New Jersey; sometimes, it’s a prohibition on referrals to ASCs by physician owners; and the FTC report addressed just the CON issue."

References 

1. Federal Trade Commission, the Department of Justice. Improving Health Care: A Dose of Competition. Washington, DC; 2004.

2. Federal Trade Commission. FTC and DOJ Issue Report on Competition and Health Care. Washington, DC; 2004. Web site: www.ftc.gov/opa/2004/07/healthcarerpt.htm.

3. American Health Planning Association. National Directory of Health Planning, Policy and Regulatory Agencies. Falls Church, VA; 2004. Web site: www.ahpanet.org/Images/CONmatrix2004.pdf.

Resource

Free copies of the report are available at the Federal Trade Commission’s web site, www.ftc.gov. Under "Contents," click on "Newsroom." Then under "Contents," click on "Reports." Scroll down to Improving Health Care: A Dose of Competition: A Report by the Federal Trade Commission and the Department of Justice (July 2004).