Last week, the Alabama Department of Public Health (ADPH) opened a public comment period on some new rules that could potentially provide financial relief to Alabama’s rural hospitals. However, the move would make state hospitals more dependent on the federal government, potentially hurting access to health care by limiting the availability of inpatient services.
Essentially, rural hospitals with no more than 50 beds could convert to outpatient and emergency-only facilities, receiving federal Medicare funding under a program created in 2021. In addition to fee-for-service payments, Medicare would cover an additional 5% of the costs of services as well as providing a monthly payment directly to the facility.
In some circumstances, converting to an emergency-only facility may temporarily stave off permanent closure, but it is unlikely to solve the long-term financial problems facing rural hospitals. Repealing Alabama’s Certificate of Need (CON) laws would go further towards addressing the needs of struggling hospitals while ensuring that rural Alabamians continue to have access to essential health care.
CON laws are regulations requiring health care providers to prove to the Alabama Certificate of Need Review Board that a new or expanded medical service is needed. It can be a costly and time-consuming process and is sometimes used by existing providers to limit competition and promote an anti-free-market environment.
Implemented nationally in the 1970s to control rising health care costs, CON laws have restricted the supply of medical equipment and facilities, increasing costs. Repealing CON laws would increase health care competition and access, lowering the overall costs of care for Alabamians. The federal government ended its CON law mandate in 1986. As of 2022, 35 states still had CON laws on the books, though the scope varies widely from state to state.
Alabama has one of the most restrictive CON requirements in the nation, with 17 services regulated by the state Certificate of Need Review Board as of 2020. State CON requirements stifle competition and health care innovation and can take a major toll on rural hospitals.
CON laws mean that “Americans living in rural areas find it harder to access care,” a study from the Mercatus Center at George Mason University reported. “They have to travel longer distances, wait longer for appointments, and pay more for care. Residents of rural states, on average, spend more and use more health care services in CON states compared to non-CON states.”
Per capita, rural residents in CON-regulated states have higher levels of Medicare spending, higher hospital readmission rates, and more ambulance and emergency room utilization. Mercatus also estimates that there are 13 percent fewer hospitals available to rural residents in states with restrictive CON laws.
Quality of care also suffers for Alabamians under CON laws. A 2020 Alabama-specific study found that if the state lifted its CON laws, post-surgery complications such as heart attacks, heart failure, and pneumonia would all decrease. Mortality rates and readmission rates would decrease as well.
In short, repealing CON laws could not only improve medical outcomes for patients but could also limit the number of post-surgery complications and readmissions, reducing the overall cost of health care.
The key to making this a reality is unleashing competition and allowing a free-market health care system to prosper. Repealing Alabama’s CON laws would allow for more health care innovation in rural communities, granting providers the authority to offer cost-effective services that best meet the needs of citizens without compromising (and likely improving) the quality of care.
More federal intervention could help a limited number of rural hospitals survive in the short term, but it is not a permanent solution to improve health care. Repealing Alabama’s CON laws would go much further toward achieving that goal for all Alabamians.
Justin Bogie serves as Fiscal and Budget Reporter for 1819 News. The views and opinions expressed here are those of the author and do not necessarily reflect the policy or position of 1819 News. To comment, please send an email with your name and contact information to: Commentary@1819News.com.
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