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INQUIRY

Table 1. Services Regulated by CON (2023). Regulated services

Number of states that require CONs for the service

Nursing Home Beds/Long-Term Care Beds

34 31 29 28 27 25 24 24 24 24 22 21 20 19 18 18 17 16 15 15 15 15 13 11 10 10

Psychiatric Services

New Hospitals or Hospital-Sized Investments

Intermediate Care Facilities (ICFs) for Individuals with Intellectual Disabilities

Hospital Beds (Acute, General, Med-Surg, etc.)

Long-Term Acute Care (LTAC) Ambulatory Surgical Centers (ASC)

Cardiac Catheterization

Rehabilitation

Substance/Drug Abuse Open-Heart Surgery

Radiation Therapy

Magnetic Resonance Imaging (MRI) Scanners Positron Emission Tomography (PET) Scanners

Neonatal Intensive Care

Organ Transplants

Home Health

Obstetrics Services

Computed Tomography (CT) Scanners

Hospice

Linear Accelerator Radiology

Mobile Hi Technology (CT/MRI/PET, etc.)

Renal Failure/Dialysis

Burn Care

Assisted Living & Residential Care Facilities

Swing Beds Lithotripsy

9 8 2 1

Gamma Knives

Ultrasound

Subacute Services

Source. Mitchell et al, 28 updated by author.

Fourth, even when potential competitors don’t object to an application, statutory language and regulatory guidelines encourage local health care monopolies. This is because this language often requires regulators to deny a CON if they believe that the new service will “duplicate”—that is, com pete with—an existing service. Fifth, CONs for some services such as birthing centers will often be denied if the center cannot convince of a major hospital to sign a transfer agreement. By refusing to sign such an agreement these hospitals can virtually guar antee that a would-be competitor will be denied his or her CON. 36 Finally, the regulatory formulas used to assess need dis courage competition. The formulas require regulators to account for the utilization of current health care services when assessing whether a new service is needed. For exam ple, if the share of beds currently being used is low enough, regulators will determine that no new beds are needed and reject any new applications. Incumbent providers are thus incentivized to keep a certain share of their beds unoccupied

There are several anticompetitive characteristics of CON regulation. First, and most obviously, the regulation limits supply, ipso facto limiting the number of providers. Second, in many states, the decision to grant a CON is made by a board whose members may work for incumbent providers. For this reasons, critics sometimes refer to CON as a “com petitor’s veto.” 32,33 Even when the decision is made by an agency rather than a board, agency staff are likely to have been drawn from the industry itself since only industry insid ers will have the requisite knowledge and interest in serving. 34 Third, in all but 6 CON states, incumbent providers are allowed to participate in the process and object to the appli cation of a would-be competitor. Opposition can trigger an expensive and time-consuming process with hearings that are akin to legal proceedings. Incumbents may drop their objections after the applicant agrees not to encroach on the territory of the incumbent, a type of territorial collusion that would be a per se violation of the Sherman Antitrust Act were it not facilitated by the state. 35(Ch 20, Sec.7)