The Lane Report: Entrenched interests limit access to health care

ARLINGTON, Va. — Why does the Bluegrass State make it so hard for new health care providers to offer services in Kentucky? A recent court case that successfully challenged Kentucky’s burdensome restrictions on new health care providers, illustrates the problem – and offers a solution for state lawmakers.

In Kentucky, those who want to provide certain health care services must hold a Certificate of Need (CON) issued by the Cabinet for Health and Family Services – essentially a permission slip from the government allowing them to operate only after “proving” their services are “needed.” As part of the application process, the state notifies existing providers in the service area, who then have an opportunity to protest the application. In most cases, existing providers can prevent new providers from opening – which is often referred to as a “competitor’s veto.”

It’s reasonable for the General Assembly to impose health and safety requirements, it’s not okay for the state to collude with existing providers to lock competitors out of the market.

Kentucky’s CON scheme is problematic for health care providers who want to increase access to healthcare services and it’s disastrous for patients who need services that aren’t currently provided or want choice in their care. They also impede existing providers from easily adjusting to patient needs without having to complete the CON process again.

The federal government agrees that CON laws are problematic. In fact, every administration dating back to President Reagan has called for states to repeal CON laws. Today, 40% of the nation’s population live in a state with zero or only one CON law.

A good example of how CON laws restrict access to care is the experience of one Ohio ambulance provider. Legacy Medical Transport, a family business, in Aberdeen, Ohio across the river from northern Kentucky, offers non-emergency service, providing transportation for people with special needs who have difficulty traveling in regular vehicles. Demand for Legacy’s services was strong, and as the fleet grew, Legacy sought to expand into Kentucky.

But Legacy hit a brick wall, Kentucky’s CON law. In-state competitors used the law to object to Legacy’s application, and the state agreed with them. Meanwhile, Legacy was receiving hundreds of requests from Kentuckians who needed to get to important medical appointments but was forced to decline those requests.

This is particularly serious because Governor Beshear signed emergency regulations in May 2023 aimed at increasing the dangerously low levels of ambulance providers throughout the Commonwealth. Yet, the Cabinet has rejected at least 11 CON applications from ambulance providers since 2011, which has left Kentucky wanting for more services.

CON laws affect more than ambulance providers. They restrict a wide range of health care services and facilities, including mental health services, primary care centers, home health agencies, birth centers, and mobile clinics. As a result, Kentuckians lose out on expanded access and lower costs that new providers would bring. In fact, the bulk of the academic literature shows that CON laws contribute to higher costs in health care, reduced availability, and worse, overall quality of care.

Legacy, represented for free by the Pacific Legal Foundation, fought back by challenging the Kentucky law in federal court, arguing the CON law violates the constitutionally guaranteed right to earn a living. Last fall, the Sixth Circuit ruled Kentucky’s CON law violates the U.S. Constitution’s Commerce Clause by restricting interstate trade. The win allows Legacy to provide ambulance services to and from the Bluegrass State, but the Court stopped short of allowing Legacy to operate within Kentucky. It defined the intrastate problem as one that “Kentucky’s legislature has inflicted on its own people.”

All of this shows that state lawmakers should take this opportunity to stop inflicting fewer healthcare options on their constituents and eliminate CON laws. This could be a full-scale repeal like South Carolina accomplished in 2023 or measured the reforms that Florida, Georgia, North Carolina, and Tennessee have accomplished over the past few years. At a minimum, legislators should repeal the competitor’s veto and allow the Cabinet to continue considering CON applications without input from the applicant’s direct competitors who have only their own interests in mind.

Kentucky lawmakers have faced political pressure from health care interests to preserve the CON law, but as the Sixth Circuit’s decision highlights, the law is harming the very people it purports to protect. Patients lose every time CON laws prevent providers from meeting needs – whether they’re small businesses like Legacy’s or entire hospitals.

This op-ed was originally published in the Lane Report on July 15, 2024