Free-market economist says certificates of need shouldn't be required for health facilities; hospitals, nursing homes disagree

John Garen (Lantern screenshot of KET legislative video)

By Sarah Ladd
Kentucky Lantern

Kentucky would be “well served by the improved access to health care” if it were to repeal its certificate-of-need laws, a retired economics professor told a legislative task force charged with examining the state’s CON structure.

University of Kentucky Professor Emeritus John Garen, who said he was speaking as an independent researcher, told legislators Aug. 21 that “the arguments made to justify certificate of need do not stand up to careful examination.”

“We should not have certificate of need on health-care services in general,” said Garen, who made his reputation as a free-market economist.

The certificate-of-need requirement mandates regulatory mechanisms for approving major capital expenditures and projects for certain health-care facilities, according to the National Conference of State Legislatures.

Sometimes called the “competitor’s veto,” 35 states and Washington, D.C., had such laws as of December 2021.

CON laws were passed with the notion that demonstrating a need for a health-care facility or service would prevent overbuilding and hold down costs, but Garen said the laws do not reduce health-care costs in general or improve quality care to underserved populations.

The Kentucky Association of Health Care Facilities, the Kentucky Home Care Association and the Kentucky Hospital Association previously testified before the task force that removing the CON review process would neither lower the cost of care nor improve its quality.

Proponents of keeping Kentucky’s CON rules in place argue that should they be repealed, competitors popping up would take away revenue-producing patients from hospitals, forcing closures or discontinuation of some services.

Sen. Stephen Meredith, R-Leitchfield, a former hospital adimistrator, said Kentucky can’t easily be compared to other places and must also be examined outside of the “average.”

“If we relied on ‘average,’ no one would ever drown in the Rio Grande,” Meredith said. “In the summertime, the average depth is three foot. Kentucky is not average. We get a lot of outlying situations, particularly for the poverty that we have in rural Kentucky, and even some of our urban areas have suffered the same problems.”

Representatives from Northern Kentucky’s St. Elizabeth Healthcare also testified, saying they support modernization of CON laws but not an outright repeal.

Mark Guilfoyle, an attorney with the Louisville firm DBL Law, who spoke alongside St. Elizabeth executive Sarah Giolando, said “certificate of need provides significant benefits,” such as access to care in rural areas.

Guilfoyle said the certificate-of-need law also reduces the need for more tax revenue for emergency medical services and incentivizes providers to serve disadvantaged patients and areas.

The next task force meeting is Sept. 18.