Opinion: Iowa patients are suffering under our certificate-of-need regime

Providers, as it turns out, can afford another competitor in their neighborhood. The question is now: Can Iowa patients afford the costs of CON?

Drew Klein
Guest columnist

Hospital capacity has become a concern for many states during the COVID-19 epidemic. But a little-known law may be contributing more to the strain on our health care than anyone understands. 

In many cases, health care providers in Iowa need a government-issued “certificate of need,” or CON, to expand or create new health care services and facilities.  A CON is a declaration that the medical investment the provider is seeking — even for something as simple as adding hospital beds — has a pressing “public need.”

In short, health care providers need government permission to give Iowans something clearly in demand: increased quality and availability of health care services. Once one looks at the CON process, it becomes increasingly clear who really benefits: incumbent competitors.  

For example, in 2017, the Mercy Medical Center in Cedar Rapids sent an application to the Iowa Health Facilities Council to build a new radiation therapy program to treat cancer patients. It was a $5.7 million investment, something that could really help Iowa patients suffering with cancer. 

The council determined that the project didn’t meet the arbitrary standards for public need. The application was rejected, with one council member explaining during the hearing that the proposal generated “too much controversy.”  

That hardly seems like a reason to deny critical medical investment.  

What was this “controversy,” anyway? 

The Wendt Cancer Center already had a radiation therapy program, as it happens. Its representatives told the council that, if Mercy Medical Center was permitted to build one, “we could be forced to close.” 

Well, that didn’t happen. Mercy re-applied in 2018, this time with the backing of 230 letters of support from patients, families, care providers, government and community leaders, and some important testimony from individuals. The request was finally accepted, despite Wendt’s insistence that if the council approved Mercy’s request, “it would threaten the continued viability of the Wendt Cancer Center.” 

Wendt did not close. Instead, it combined its services with Grand River Medical Group and underwent a $2.2 million renovation. 

As CON disputes go, this one is both common and uncommon. It is common because, when providers apply for the construction or purchase of new equipment, they are typically besieged by objections from incumbent providers. Those providers are never pleased with attempts from competitors to offer services in the same territory, even if such expansions help patients — and they often do. 

But it is also uncommon in that this story has a happy ending. Mercy’s application was approved, Wendt did not close, and Iowa patients won the day with better availability of health care services. 

A new report on CON by Americans for Prosperity Foundation studies the effects of these laws in Michigan, South Carolina, Virginia, and Iowa. It finds that from July 2016 to February 2020, the Iowa Health Facilities Council rejected over $250 million in requests for health care investments across the state. 

Providers had to pay, on average, $15,774 in application fees for CON. That doesn’t even count the cost of legal representation or outside consultants to prepare applications. The costs of going through government hoops undoubtedly deterred many from even trying to offer new or expanded health care services. 

This has consequences. One Mercatus Center study estimated that Iowa would have 51 additional hospitals and four more ambulatory surgery centers without these laws.  

It’s easy to see why these laws make little sense. They allow government to veto innovation for our health care, using a system that seemingly only exists to protect the interests of incumbent providers rather than create better health care outcomes for Iowans.

Before the pandemic, CON laws were a nuisance. But when COVID-19 hit Iowa, their harmful effects became even more pronounced. That is why, in March of last year, Gov. Kim Reynolds suspended CON for providers looking to add hospital beds. 

Maybe the COVID-19 pandemic will produce an awakening for our lawmakers. The evidence is stacking up against CON, showing that these laws reduce access to quality, affordable care and shackle providers to an unworkable regime that stifles innovation. 

Providers, as it turns out, can afford another competitor in their neighborhood. The question is now: Can Iowa patients afford the costs of CON? 

Drew Klein

Drew Klein is state director of Americans for Prosperity Foundation-Iowa.