SB2123: Outdated CON laws holding back Hawaii healthcare

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Senate Committees on Health and Human Services and Commerce and Consumer Protection on Feb. 7, 2024.

Feb. 7, 2024, 1 p.m.
Hawaii State Capitol
Conference Room 225 and Videoconference

To: Senate Committee on Health and Human Services
      Sen. Joy A. San Buenaventura, Chair
      Sen. Henry J.C. Aquino, Vice-Chair

      Senate Committee on Commerce and Consumer Protection
      Sen. Jarrett Keohokalole, Chair
      Sen. Carol Fukunaga, Vice-Chair

From: Grassroot Institute of Hawaii
           Ted Kefalas, Director of Strategic Campaigns


Aloha Chairs, Vice-Chairs and Committee Members,

The Grassroot Institute of Hawaii would like to offer its support for SB2123, which would repeal the state’s certificate-of-need program.

If enacted, this bill would comprise an important step forward in increasing healthcare affordability and accessibility in Hawaii. Recent studies suggest that CON laws have the counterproductive effect of limiting healthcare quality and access, especially for rural areas and vulnerable populations.

Consider that:

>>States with certificate-of-need laws have fewer hospitals, substance treatment facilities, psychiatric hospitals, ambulatory surgical centers, dialysis clinics, nursing home beds, open heart surgery programs and hospice care facilities.[1]

>>CON regulations tend to lead to fewer hospital beds, decreased access to medical imaging technology and longer wait times.[2]

>>CON regulations are linked to fewer rural hospitals and alternatives. Residents of CON states have to travel farther for care and are more likely to leave their states for care.[3]

Defenders of CON laws claim that they are needed to constrain high healthcare costs and guarantee access to higher-quality care. However, that is not supported by the research, which demonstrates that such laws are associated with higher per-person healthcare costs and higher death rates from treatable complications following surgery.[4]

According to a 2020 study from the Mercatus Center, Hawaii has the highest number of certificate-of-need restrictions in the country.[5] The result of those restrictions is to make healthcare more expensive, limit access to care and lower the overall quality of care.

By comparing costs and outcomes in states with restrictive certificate-of-need laws to those without, the Mercatus Center determined that CON laws increase annual per capita healthcare spending in Hawaii by $219 and reduce the number of healthcare facilities in the state by about 14.[6]

The Center also estimates that without certificate-of-need laws, deaths from post-surgery complications would decrease by about 5% and the proportion of patients who would rate their hospital highly (at least 9 out of 10) would increase by 4.7%.[7]

By imposing limitations on the construction of healthcare facilities, certificates of need have the effect of limiting treatment options for Hawaii residents. The lack of alternatives and options has an effect on everything from care for the homeless to mental health.

Since 2006, Hawaii officials have denied[8] more than two dozen certificate-of-need petitions, representing over $200 million in private healthcare investment. Those included three medical facilities that would have added 206 beds, increasing the current hospital capacity by 8%.

The thinking behind certificate-of-need laws has long since been abandoned, and CON reform has been a growing trend in healthcare policy. More than a dozen states have fully repealed their CON programs, and even more have been rolling them back.

It is time that Hawaii joins those states by eliminating its certificate-of-need regime. Over time, repeal would reduce costs, incentivize the construction of new facilities, and improve healthcare quality and access in Hawaii.

Thank you for the opportunity to testify.

Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii

[1] Mitchell, Matthew D. “West Virginia’s Certificate of Need Program: Lessons from Research,” Mercatus Center at George Mason University, Sept. 22, 2021.
[2] Ibid.
[3] Ibid.
[4] Ibid.
[5] “Hawaii Certificate-of-Need Programs 2020,” Mercatus Center, March 22, 2021.
[6] “Certificate of Need Laws: Hawaii State Profile,” Mercatus Center, November 2020. Available at https://www.mercatus.org/publication/hawaii-and-certificate-need-programs-2020.
[7] Ibid.
[8] “Certificate of Need Applications and Decisions,” Hawaii State Department of Health.


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