Civitas goes awry while giving health policy a try

The folks at Civitas are good at what they do, which is mostly political hackery and buying push polls from New Jersey. It’s when they wade out into the rough waters of policy that things get a bit dicey. Despite the dangers, Civitas has decided to leap into the issue of Certificate of Need by bumbling through a five part series on the complex topic.

What is Certificate of Need? Generally when you want to build new health care facilities or purchase expensive medical equipment in North Carolina you need to first get permission from the state. The idea is that an unrestrained proliferation of hospital beds and fancy imaging devices will lead to more expensive, inefficient care without providing better outcomes. Certificate of Need also helps maintain access to health services in rural parts of the state. As has happened many times, hospitals want to get out of poor regions where the populace is underinsured and move to wealthier environs. The Certificate of Need process either makes the hospital stay put, or it seeks some compromise. A hospital may only get permission, for example, to move a bit closer to a wealthy area while leaving some critical facilities in the underserved area.

Civitas predictably tells us we should scrap all of this. The justifications for CON laws are flawed and these regulations actually hurt access.

One of the theoretical underpinnings for CON is “Roemer’s Law”, which Civitas tells us is untrue. Let’s set aside for a moment that Roemer’s first name was Milton, not Mitch. Roemer’s idea was that the supply of medical facilities and technology can stimulate its own demand. Where there is an overabundance of intensive care rooms and imaging devices people tend to spend more time in the hospital getting more tests. The short hand description of Roemer’s Law is that a “built bed is a filled bed”.

Statisticians and health policy analysts have spent decades trying to prove or disprove Roemer’s basic premise. But it turns out that a summer fellow at Civitas can debunk Roemer in a few sentences! Just think of all the wasted careers.

If a built bed were a filled bed, says the seasonal Civitas employee, then hospitals would operate at 100 percent occupancy all of the time. As most people would recognize, the shorthand description of Roemer’s Law is not meant to be taken literally. Roemer did not think that all built hospital beds are occupied by a warm body at all times. If that were the claim then someone could just wander around the hospital until they found an empty bed and say, “Aha! I have found an unoccupied bed. That Roemer was wrong all along.”

Instead, the idea is that supply can stimulate demand. Part of the reason is the third party payment system (good job Civitas). But, as Nobel economist Kenneth Arrow noted on many occasions, health care is not a typical commodity. So the reasons that supply stimulates demand are subtle and complicated. Most health care spending comes at the end of life when people are having multiple system failures. These patients tend to get shuffled around to various specialists and undergo test after test. With the stress and confusion it’s not really the best time for shopping around to find the best price on an MRI. Even if someone is not shielded by an insurer, people will pay any price and go into debt if a doctor says the tests are necessary to extend the life of a loved one.

But we do know after much empirical research by the analysts at Dartmouth that where there are more intensive care beds and more imaging devices people tend to see more doctors and have more procedures done with no better outcomes. These patients also tend to be less satisfied with their care.

But, Civitas says in the first part of its series, CON denies access. Again, I will set aside the fact that CON has preserved access to health facilities many times in North Carolina as hospitals attempted to flee rural areas. The American Medical Association, we are told, found that people in states without CON laws were slightly more likely than patients in states with CON laws to receive revascularization after a heart attack. That sounds serious. Who could support a policy that must be literally killing people?

I won’t ask that someone at Civitas read an entire academic paper. But just look at the “Conclusions” and scroll down to the last sentence. Too much to ask? Ok, I’ll quote it here:

However, differences in the availability and use of revascularization therapies were not associated with mortality.

I see. So in states without CON laws you are more likely to get sliced open without any better outcomes than in states with CON laws. And this is an argument against CON?

Civitas follows the arguments of frustrated doctors by claiming that hospitals tend to win competitive CON battles. The reason may be partly political. But hospitals also tend to be open all day, every day. And hospitals treat a large number of indigent patients. Placing imaging technology in a hospital makes it more available to more people at more times than sticking an MRI machine in a boutique clinic that sees few poor patients and is open only during weekdays.

Although it’s a little painful watching Civitas do policy, I don’t disagree with some of their less radical calls for reforming the CON system. I don’t have any particular stake in maintaining the existing process. But abolishing CON or easing the restrictions on building medical facilities will lead to less access in underserved areas and more inefficient care.


  1. brian b

    September 30, 2011 at 4:14 pm

    I won’t ask that someone at Policy Watch read an entire article he blogs on. But just look at the article
    and scroll down to the second-to-last paragraph. Too much to ask? Ok, I’ll quote it here:

    “While the study does not find a notable difference between mortality rates of states with and without CON laws, the study does find that individuals in CON states are more likely to have to wait longer to receive their surgery.”

    And your disdain for “seasonal” employees is duly noted. Why the need to look down your nose at interns? Is that a requirement at Policy Watch?

  2. Neal Inman

    September 30, 2011 at 4:23 pm

    Thanks for reading our series Adam.

    Unless you are too busy combing our articles for misspellings, could you
    demonstrate how the current Certificate of Need process actually
    controls healthcare costs? We looked at studies from Duke University,
    the FTC and DOJ, and independent reviews of the state CON processes in
    Illinois, New Jersey, Washington, among others. None of them could show
    that CON controlled the rise in healthcare expenditures, and many
    advocated the repeal of the process.

    The CON process in our state is largely run for the benefit of large
    healthcare corporations. These giants use a state health planning board
    stacked with hospital executives, exemptions in ethics laws, and an
    endless repeal process to shut out competition. There is a reason a
    recent legislative hearing on CON was overflowing with healthcare
    industry lobbyists-the current system boosts hospital profits

    True solutions to healthcare costs are going to come from changes to
    federal law, not state laws which largely tinker around the edges of
    healthcare spending.CON has not been shown to effectively control costs,
    which was the original reason for its implementation. We recommend a
    serious look at repealing many aspects of the current regulatory scheme.

    While we will disagree on the direction healthcare reform should take
    (Policy Watch presumably preferring more regulation and centralized
    planning, while we advocate more for freer healthcare markets), I think
    neither of us would want to advocate the continuation of an ineffective
    process that is tainted with cronyism and cartel behavior.

    Neal Inman

  3. gregflynn

    September 30, 2011 at 7:10 pm

    This one is dripping in irony:

    “True solutions to healthcare costs are going to come from changes to federal law, not state laws which largely tinker around the edges of healthcare spending.”

    Civitas has been leading the charge for the state to opt out of federal healthcare laws. You need to make up your mind.

  4. Neal Inman

    September 30, 2011 at 7:57 pm

    It is not a contradiction to be against the ACA and still think that federal healthcare policy could be changed for the better. Privileging employer-based care over the individual market in taxation is one example of bad law. If the federal government would actually allow state-based solutions, great. That really isn’t possible under current law.

  5. Jack Thompson

    September 30, 2011 at 9:10 pm

    I assume you simply skimmed through most of these articles and looked for keywords, because if you had actually read Access Denied, you would have noticed that the entire purpose of the article was to show how it reduced ACCESS to medical service. So, you know, when you quoted that blurb from the academic paper, you didn’t really undermine the point of the article… at all.

    In fact, if you had taken the 10 seconds extra to read the second to last paragraph, you may have noticed that it was specifically mentioned that the study didn’t find a noticeable difference between the outcomes of patients who required revascularization surgery in CON states and non-CON states. Then you would have read that that the study also found that people in CON states had to wait longer periods of time to receive their surgery, had to travel more to receive their surgery, and subsequently wasted more time and money trying to do everything they could to stay alive in CON states compared to non-CON states. You, my friend, have a backwards definition of ACCESS.

  6. AdamL

    October 3, 2011 at 1:47 pm

    I see while I was out of town some comments were left on the post.

    Thanks for the specific example of political hackery, Brian. I had forgotten about the Ross bit.

    Neal, you took a good stab at tackling a complex subject for an organization not known for nuance. Indeed, you cited the well tread studies that are always used to argue that CON does not contain health costs. There are also a number of well tread articles that argue CON does contain costs, as I’m sure you know. You can find all of these tired debates with a few Google searches. Here’s a good overview, for example, from Maggie Mahar:

    As a note for all concerned, I just don’t think the AMA article you cite supports the abolition of CON. Perhaps my definition of “ACCESS” is backwards, as Jack suggests. But the article notes for some procedures, bypass for example, CON states have lower mortality rates than non-CON states. With revascularization after heart attacks there is no difference in mortality. Moreover, those without a clear clinical need for revascularization tend to get cut open more often in non-CON states without any better outcomes. But those who need revascularization the most get the procedure in CON states and have better outcomes than in non-CON states.

    Having said all of this, I’m skeptical of studies that attempt to draw grand conclusions about CON and non-CON states. As the AMA study demonstrates, defining a CON state is difficult. You have to account for the wide range of permissiveness in different CON laws. Then there are states that were loose with CON regulations and then tightened the process, or vice versa. Massachusetts, for example, allowed a medical arms race in the Boston area and is now trying to reign in the proliferation of medical facilities.

    How does CON help control costs? Thirty years of Dartmouth research has convinced most health services researchers that Roemer’s Law is basically correct (the Civitas debunking notwithstanding). That means that in areas where there is uncontrolled expansion of medical facilities and the purchasing of fancy medical devices, costs will increase and care will be less efficient. You can see that in many areas using the Dartmouth Atlas. In North Carolina we have some high cost areas that could be more efficient, but overall we do a decent job of providing efficient care at a reasonable cost. This is especially true when you look at places like Miami and Los Angeles.

    Also, since I care about “ACCESS,” it is important that CON has preserved access to health services in many rural areas of our state as hospitals have tried to flee to wealthier counties.

    Again, I’m not wedded to CON. I just don’t want hospital beds and medical devices popping up across the state without any checks. And I don’t want our hospitals moving out of poor areas and into rich areas, especially not when the poor areas spent years subsidizing these hospitals with big tax breaks. If there is a better way to accomplish these goals without CON, so be it. Until then, we need to keep a CON process in place.