How a 2019 Florida Law Catalyzed a Hospital-Building Boom

Excerpt – Florida is among the states that have abandoned a decades-old regulation meant to keep medical costs in check. The requirement, used nearly nationwide until the 1980s, allowed new hospital construction only if a state issued a “Certificate of Need,” or CON. The process involves would-be hospital builders applying to the state and the state government evaluating need based on criteria such as population growth and existing hospital capacity.

About two-thirds of states still require a CON. But several, including Georgia, Kentucky, and South Carolina, have this year debated whether to scrap or loosen restrictions. West Virginia relaxed its rules in March.

Critics of the CON process say it stifles competition and limits access to care. But the hospital industry often defends the process, which protects facilities from would-be rivals.

In most industries competition drives down prices, but more hospital beds and services can actually boost the cost of patient care as pressure to recoup all that investment spreads through the system.

When there’s excess medical capacity, doctors may overprescribe — for instance, by ordering a pricey CT scan instead of a cheaper X-ray, said Steve Ullmann, a University of Miami health policy professor.

“All that construction has to be paid for somehow,” said Allan Baumgarten, a Minnesota-based consultant who analyzes health care markets.

Competition can also bid up labor costs, which contribute to health costs.

Meanwhile, more hospitals could leave medical teams at any one hospital performing fewer complex procedures and dilute quality, some experts say.

What’s more, as Wesley Chapel shows, new construction doesn’t necessarily favor the areas that need it most. Hospitals tend to follow the money — to relatively affluent markets instead of underserved rural or urban communities.

While dozens of new hospitals are planned for Florida, none are going up between Jacksonville and Pensacola, a more than 300-mile swath of largely rural counties spanning two time zones. [..]

Patients tend to go where insurers allow and where doctors send them instead of shopping around and comparing prices. When an insurer is footing the bill, a patient may not balk at the cost.

Insurers pass costs to patients by raising premiums and deductibles and restricting coverage by, for example, requiring members to use narrow provider networks, Ullmann said. [..]

Even with the state’s growing population, “none of these communities have a shortage of inpatient care,” said Quick, referring to suburban areas like Wesley Chapel. “What we have is a shortage of sick people.”

Full article, P Galewitz, L Sausser and D Chang. KFF Health News 2023.4.26