Some state legislators hope to perform surgery this year on Tennessee's certificate of need (CON) program for healthcare facilities and services, and their proposed legislation to cut back the regulations animated both supporters and opponents.

The Tennessee Hospital Association (THA) wants to keep regulations, which require healthcare providers to go to the Tennessee Health Services and Development Agency (THSDA) for a certificate of need when they want to build new facilities or offer new services. THA president and CEO Craig Becker said hospitals are not competing on a level playing field with other healthcare businesses.

“We operate 24/7. We have emergency rooms. We have to take all comers whether they have insurance or not. Not everybody has to do that,” Becker said. “Sixty percent of our revenues are already dictated by the federal and state government. Medicare and Medicaid tell us how much they're going to pay us, period, end of story.  

“On top of that, close to 14 percent of the folks who come through our doors are uninsured. So they obviously dictate how much they're going to pay us, which generally is not much.”

Among outspoken opponents of CON regulations is the Beacon Center of Tennessee, the free-trade-oriented nonprofit based in Nashville that played an active role in last year's defeat of Gov. Bill Haslam's Insure Tennessee proposal to expand the state's health insurance to nearly 300,000 uninsured residents.

Lindsay Boyd, the Beacon Center's director of policy, calls CON laws "antiquated" and says they limit options for consumers, especially low-income and rural patients. She says the federal government and some states repealed CON laws more than 25 years ago because they weren't having the intended effect of controlling healthcare costs.

“Healthcare continues to be a commodity that is constantly increasing in price, and the amount of healthcare providers out there is diminishing,” Boyd said. “We believe it's time that Tennessee reforms these laws so that we create more space in the healthcare market and more providers for those most in need.”

Magnetic resonance imaging, with expensive equipment that requires a large physical space for operation, is among the services that require a state certificate of need. In 2013, TennCare reported that if state legislators decided to end the CON process for imaging services, it would cost the state nearly $1.6 million a year. "We have conservatively estimated a 5 percent increase of $1,590,757 in the first year" for MRIs and PET scans," the report said. 

“Diagnostic imaging utilization increases significantly when there is a greater supply available and especially when the service provider is owned by physicians who self-refer. Despite current CON requirements, Tennessee with 275 has more MRIs than New York, Kentucky or Michigan.”

At THA, Becker echoed that opinion. 

"If you buy one of these machines, you're going to make it hum to make sure it pays itself off and you get your return on it," he said. "From our perspective, one, it's not necessarily the best quality of care. If you don't need an MRI, you shouldn't get one. Secondly, it doesn't make a whole lot of sense to have a lot of MRIs out there. There are more MRIs in Nashville than there are in most of the provinces of Canada. Not saying that we want to be like Canada, but I think there's some happy medium in there. We're probably at it right now."

At Beacon Center, Boyd counters that the number of MRIs in the state should be determined by businesses, not government. 

“If businesses believe that it's judicious for them to purchase an MRI machine because they have the patient demand to justify that, then they should be free to make that decision," she said. "If they make that decision and it's an error, or they find that they don't have the patient demand to justify that cost, then that's a decision that they're going to have to be held accountable for to their board members and their investors.”

Becker said imaging services may be one income source that keeps rural hospitals afloat. “If a local physician gets a hold of an MRI, they can pretty much put a hospital out of business with that alone,” he said. “If they're an entrepreneur, they are not going to take uncompensated care and they're more than likely not going to take Tenncare patients. A lot of times they sign things that say they will, but we know they don't.”

Jim Christoffersen, THSDA legal counsel and legislative liaison for the agency that issues certificates of need, said the process was overhauled in 2002. "We think the process is strong and the statute is good, that it's important health planning, but there's always room for improvement,” he said. 

Both sides of the discussion can point to academic studies that back them up.

At Vanderbilt University Medical Center, a study framed the CON issue in terms of quality of care, and reported that medical outcomes improved when patient volumes at a hospital increased, permitting the facility to become more proficient at specific services. 

“One of the goals of the original 1974 federal CON legislation was to 'improve the outcome of medical care by increasing the volume of patients at any one given hospital,'" the report said. The Vanderbilt analysts said a review of medical literature "shows that patients have lower death rates in hospitals/medical centers that have high volumes of certain services.”

The services cited were surgery, including open heart surgery and cardiac catheterization; burn care; neonatal intensive care; and organ transplants. "Medical literature also shows that patients undergoing CABG (coronary artery bypass graft) surgery in states with CON have lower death rates than those in states without a CON," the Vanderbilt study said.

The points against CON made by Boyd of the Beacon Center were similar to those outlined in a study at George Mason University's Mercatus Center, which noted that Tennessee was among states with the seventh most restrictive CON process of the 36 states that have the programs. 

 “Since 1973, Tennessee has been among the states that restrict the supply of healthcare in this way, with 20 devices and services — ranging from acute hospital beds to magnetic resonance imaging scanners to psychiatric services — requiring a certificate of need from the state before the device may be purchased or the service offered," the report said.

The report said that in Tennessee, the CON program may have resulted in 8,500 fewer hospital beds and 32 fewer hospitals offering MRI services. In opposition to the TennCare study, the Mercatus study said strict CON programs may "increase costs by 5 percent" because they limit the number of service providers, who then are "able to charge higher prices than would be possible under truly competitive conditions."

Said Boyd: “The best thing for the patient is to be able to have choices. The reason why healthcare costs are so astronomically high these days is because nobody knows the real cost of their care. You can't get a transparent, forward-thinking diagnosis and assessment from the hospital prior to treatment. You're only told after the fact what the actual costs are when you receive a bill."

While Vanderbilt's study supported CON regulation, it also called for changes in parts of the process, such as dollar thresholds for construction and equipment and fees for CON applications.

The final version of legislation to alter CON regulations in Tennessee is still being created. The bill's Senate sponsor, Todd Gardenhire, R-Chattanooga, is leading a group of senators in a summer review of the program. The sponsor of the companion bill in the House, Rep. Cameron Sexton, R-Crossville, told The Tennessean in January that he hopes CON changes will lead to "as much free market as we can potentially have."