Vermont’s healthcare landscape is shaped significantly by its Certificate of Need (CON) program, which imposes state-level approval requirements for expanding or establishing healthcare services. Originally conceived to prevent excess capacity and control costs, these regulations impact a range of services, from hospitals to diagnostic imaging and home health care (HHC). While the program is designed to ensure quality and manage resource allocation, evidence suggests it may inadvertently contribute to higher costs, limited competition, and reduced access to services.
What Is a Certificate of Need?
The CON program mandates that healthcare providers obtain state approval before offering new services or expanding existing ones. This requirement covers a broad array of healthcare facilities and services in Vermont, including:
- Hospitals and Specialized Facilities: New construction, expansion, or renovations.
- Nursing Homes and Long-Term Care Facilities: Including adding beds or opening new facilities.
- Diagnostic Imaging and Medical Equipment: High-cost equipment like MRIs and CT scanners.
- Substance Abuse and Mental Health Treatment Centers: Establishing new facilities or expanding services.
- Home Health Care and Hospice Services: Opening new agencies or offering additional services.
The idea behind the CON program is to avoid unnecessary duplication of services, control healthcare costs, and ensure quality by limiting the number of providers. Proponents argue that by regulating the number of facilities and services, states can prevent overuse of healthcare resources and maintain a balance in the supply of services.
The Origins and Rationale Behind CON Laws
The concept of CON regulations dates back to the 1970s, when federal legislation encouraged states to adopt these programs to manage healthcare growth. The theory was that an oversupply of healthcare facilities would lead to unnecessary utilization, thus driving up costs. By controlling the number of services offered, regulators hoped to prevent a healthcare “arms race” where providers added services just to outcompete others, leading to excessive costs for patients and insurers.
However, the federal mandate was repealed in 1987, leaving states to decide whether to keep their CON laws. Vermont chose to continue its program, applying it to various healthcare services with the intent to control costs, stabilize service quality, and prevent market saturation.
The Impact on Home Health Care: A Case in Point
The ongoing moratorium on new home health care (HHC) agencies in Vermont serves as a clear example of how the CON program affects service availability. The state extended its moratorium on certificates of need for new HHC agencies through 2030 under S.162. The rationale is that limiting the number of providers ensures that existing agencies, like Bayada and Rutland Area Visiting Nurses (RAVN), can maintain sustainable operations while allowing the state to manage service quality more effectively.
Yet, the results indicate otherwise. HHC services in Vermont remain expensive, typically costing $30 to $35 per hour—on par with states that have fewer regulatory barriers. This similarity in pricing suggests that restricting competition through the CON process has not effectively controlled costs. Furthermore, the limited number of providers may contribute to service scarcity, particularly in rural areas, making it difficult for residents to access affordable care (Department of Vermont Health Access)(Vermont Legislature).
Are the State’s Assumptions About Excess Capacity Flawed?
The assumption behind the CON program is that limiting capacity prevents overuse of services and controls costs. However, this theory does not always hold up in practice. States that have eliminated CON requirements, such as Texas, Colorado, and Arizona, have not experienced the feared over-saturation of healthcare services. In fact, these states often see more competition, which can drive prices down and improve quality by incentivizing providers to innovate.
A key criticism is that the state may not be as informed about the specific needs of Vermonters as healthcare providers who directly serve patients. By letting market forces determine service levels, providers can adapt more quickly to meet actual demand. For example, if there is unmet demand for HHC services in rural Vermont, allowing new providers to enter the market could improve accessibility and potentially lower prices through competition.
What Do We See in States Without CON Programs?
In the 15 states without CON laws, including New Hampshire, Texas, and California, healthcare markets function without the need for state approval to establish new services. The evidence from these states shows:
- No Widespread Over-Saturation: The feared explosion of unnecessary facilities and services has not occurred. Instead, market dynamics have naturally adjusted to actual demand.
- Competitive Pricing: The absence of CON requirements has allowed competition to flourish, often leading to lower costs for services like outpatient surgery, diagnostic imaging, and home health care.
- Improved Access to Care: Providers can expand services quickly in response to community needs, leading to greater accessibility, particularly in underserved or rapidly growing areas.
Studies suggest that increased competition leads to better outcomes and lower costs, contradicting the premise that more facilities automatically lead to higher healthcare expenses (Department of Vermont Health Access)(Vermont Legislature).
Quality Control vs. Market Control: Are CONs Outdated?
One of the main arguments for maintaining CON laws is that they help ensure quality by regulating the entry of new providers. However, this raises the question: Is it really the state’s job to determine what Vermonters need or want in terms of healthcare services?
The market itself, driven by consumer choice, may be better suited to regulate service levels and quality. Providers like Bayada and RAVN already have deep expertise in delivering home health care and can adapt their services based on patient demand without needing the state to intervene. Additionally, the quality of care has not consistently been shown to suffer in states without CON regulations, where competition encourages continuous improvement.
The Hidden Costs of Maintaining the CON Program
Maintaining the CON program also incurs administrative costs, from regulatory staff salaries to legal expenses associated with disputes and appeals. Eliminating the program could save Vermont significant sums, not only by reducing administrative overhead but also by lowering healthcare costs through increased competition.
Moreover, the state’s involvement in regulating healthcare capacity creates barriers for new providers who might otherwise enter the market and offer more affordable or innovative services. This lack of competition can lead to complacency among existing providers, with fewer incentives to improve efficiency or reduce costs (Vermont Disability Services)(Vermont Legislature).
Conclusion: Time for a Rethink?
Vermont’s Certificate of Need program, while aimed at controlling costs and ensuring quality, may be having the opposite effect. By limiting competition and regulating service availability, the state potentially increases costs and restricts access to care. States without CON requirements have demonstrated that healthcare markets can adjust effectively to meet demand, often with better outcomes for patients.
As Vermont considers the future of its healthcare system, revisiting the role of CON laws and exploring a more open market approach could benefit residents. The state’s efforts would be better spent on setting quality standards and allowing the free market to determine the best ways to meet the healthcare needs of Vermonters.
Dave Soulia | FYIVT
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