Certificate of Need

 


Impact #3 - Higher Costs for the Community

It is no secret that businesses who operate on an economy of scale model see a proportionate savings in costs gained through an increased level of production. That being said, acilities that operate in CON states are more likely to perform a greater number of procedures than their counterparts in non-CON states due to there being fewer hospitals within a given area. Following this economy of scale principle, CON state hospitals can offer their procedures and services at a lower cost due to increased volume.

 

One of the states that has experienced the negative effects of the absence of a CON law is Texas. Specifically, in the Dallas-Fort Worth market, deregulation has driven up costs and resulted in an oversaturated market of medical facilities and services. In 2013, the Dallas-Fort Worth market was in the midst of an explosion of hospital construction and expansion as well as physician-owned health care businesses. However, despite this fact, health care costs have remained significantly higher than other markets as facilities had to increase prices to cover costs in their flooded environment.  Finally, the region has experienced a proliferation of free standing Emergency Departments, which has not only caused a strain on the medical workforce and finite resources but has also driven up costs.

 

You can read more about what occured in Texas along with other research studies supporting this notion below.

 

2006 – HealthLeaders-InterStudy

2012 – Michigan’s Manufacturers Association

2009 – American Journal of Managed Care

2007 – Medical Care Research and Review

2002 – Chrysler Corporation