Feds pressure Illinois to curtail certificate-of-need laws

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In a joint statement to the Illinois Task Force on Health Planning Reform, the Department of Justice (DoJ) and the Federal Trade Commission stated the agencies’ position regarding certificate-of-need (CON) laws, saying that the laws undercut consumer choice, stifle innovation and weaken markets' ability to contain healthcare costs.

According to the agencies, state CON programs generally prevent companies from entering certain areas of the healthcare market, unless they can demonstrate to state authorities that there is an unmet need for their services.

The task force is considering eliminating or amending Illinois’ CON requirements. The agencies were asked by the task force to present their views at a meeting held in Chicago on Sept. 15.

In the joint statement, the agencies said that CON laws impede the efficient performance of healthcare markets by creating barriers to entry and expansion, to the detriment of healthcare competition and consumers.

"The Antitrust Division is committed to providing guidance on how to promote competition in the health care industry," said Thomas O. Barnett, assistant attorney general in charge of the DoJ’s antitrust division. "Competition in this important industry benefits consumers by offering lower prices and better quality services."

The statement reviews economic research on the effects of CON laws, as well as some of the risks that CON laws can entail. For example, in addition to limiting entry, CON laws create opportunities for existing competitors to exploit the CON process to thwart or delay new competition and facilitate anticompetitive agreements among providers.

The joint statement also evaluates several arguments in support of CON laws, noting that the original cost-control reasons for CON laws no longer apply and that CON laws are an ineffective means to fund indigent care.

The agencies encouraged members of the Illinois task force—as well as officials in other states that continue to require CON—to consider whether such laws do more harm than good.