Hawaii healthcare system in dire need of CON law reform

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Human Services on March 21, 2024.

March 21, 2024, 9:30 a.m.
Hawaii State Capitol
Conference Room 329 and Videoconference

To: House Committee on Human Services
      Rep. Lisa Marten, Chair
      Rep. Terez Amato, Vice-Chair

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


Aloha Chair Marten, Vice-Chair Amato and Committee Members,

The Grassroot Institute of Hawaii would like to comment in support of HCR101 and HR82, which requests that the Legislative Reference Bureau conduct a study of Hawaii certificate-of-need program.

The  study would include the impact and cost of the CON program; whether it discourages providers from constructing or expanding facilities in the state; whether to eliminate the “competitor’s veto”; whether some facilities should be exempt from CON; whether Hawaii should consider adopting CON reforms from other states; and whether reducing or eliminating CON requirements could improve care on neighbor islands and for vulnerable populations.

Reforming Hawaii’s certificate-of-need program would be 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.

For example,  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.

By initiating a comprehensive study on the impact of Hawaii’s CON laws, this resolution could  help identify a path forward for reasonable CON reform in our state.

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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