The evidence is clear: States exacerbated pandemic’s effect

As Americans wait on the next round of vaccines and experts ponder when to expect another COVID-19 surge, how many hospital beds do we need in Oahu, East Alabama or Everett, Mass.? In early 2022 – as omicron took hold two years into the pandemic – the answer was far more than regulators thought. Hospitals again ran out of space to treat patients.

That’s tragic. Even before a hospital runs out of beds, patients suffer. Caregivers in capacity-constrained facilities might keep them in waiting rooms longer, more aggressively triage them or discharge them earlier than they would otherwise. The problem isn’t just one particular surge, nor stubborn vaccine reluctance. In much of the country, it’s exacerbated by a regulation quite literally designed to limit the supply of medical resources. Our research speaks directly to this policy’s effects during the pandemic.

Certificate-of-need (CON) regulation has been around for decades, and an overwhelming body of research suggests it raises costs, undermines quality of care and limits patient access to needed services. Let’s start with a quick summary.

CON regulations require health care providers hoping to open or expand services to first prove to regulators that their communities need the service. Thirty-five states (plus Washington, D.C.) have CON programs, covering everything from hospital beds and hospice care to dialysis clinics and drug abuse facilities. 

Cronyism is one problem. Existing providers who may not want the competition often serve on CON boards and review applications. In all but five CON states, competing providers are invited to formally oppose applications.

Policymakers adopted these rules hoping to restrain health care spending. It has not worked out that way. Instead, researchers associate CON regulation with more spending. Facing less competition, approved providers can charge more and bend the health care cost curve upward.

CON states see worse health outcomes (including higher mortality rates following heart attacks, heart failure and pneumonia), lower levels of patient satisfaction and worse outcomes for nursing home and home health care patients.

Then there’s access to care. The typical patient in a CON state has access to fewer hospitals, hospice care facilities, dialysis clinics, psychiatric care facilities and cancer treatment facilities. Patients there drive farther, leave their states more often and wait longer for care. Black-white care disparities are greater in CON states.

This is all well-established, and for more than two years, critics have speculated on its effects in the COVID-19 era. In the latest research, we find that patients in certificate-of-need states have indeed had a much harder time finding open hospital beds during the pandemic. 

Looking at data from the past few years from all 50 states and controlling for other factors, we compared what happened in states that require a CON to add a hospital bed versus those that do not. On average, the CON states had 58 percent more days with more than 70 percent of all state hospital beds filled.

To take a closer look at the situation, we also examined facility-level data from 4,900 health care facilities throughout the country from July 2020 through October 2021. Again, controlling for other potentially confounding factors, including new COVID cases, we found that hospitals in CON states were 27 percent more likely to run out of beds.

These findings may help explain why other researchers have found that mortality rates were higher in CON states than in non-CON states during the pandemic. 

To their credit, 27 states relaxed their CON programs to meet the surge. Unfortunately, hospitals in these states were no less likely to run out of beds. This is not terribly surprising. The emergency rooms and ICUs that house the beds (themselves often limited by CON laws) take time to build. The procurement process may also take too long to ramp up capacity in an emergency.

Finally, providers may not have been able to expand capacity because of the way CON laws were eased. Beds acquired under the emergency guidelines had to be temporary. Combined with procurement challenges, this may have made providers reluctant to even try. Hospitals may have been unsure about losing their investment, especially in a time when resources had to be carefully allocated. In any case, the relaxation of CON laws during the pandemic seems to have been too little, too late.

Decades of peer-reviewed research overwhelmingly shows that certificate-of-need laws are an across-the-board failure. In the midst of a global pandemic, too many patients have learned the hard way that these antiquated rules have always stood in the way of patient care.

Matthew D. Mitchell and Thomas Stratmann are senior research fellows with the Mercatus Center at George Mason University. They are coauthors of a new study, “Certificate-of-Need Regulation and Hospital Bed Utilization during the COVID-19 Pandemic.”