In a free-market, if an entrepreneur wished to organize a group of doctors, nurses and assorted personel to put their capital together a form a hospital there would be no prohibition from doing so.

This is not the case in today’s American state regulated system.

In the present regulated (un-free) health care system before a company can: open a hospital, add new capital invesments (like an state-of-the-art MRI machine), offer new medical services and innovations, or add new hospital beds to an existing facility, in a given area, it needs to obtain a certificate of need (CON) to show that there is a “need” for such a measure.

The alleged purpose according its anti-capitalist supporters is to prevent the “unnecessary and wasteful duplication of medical services” unless they meet a “community need.” That’s like saying a town can have only two burger joints McDonald’s and Burger King, but Wendy’s is forbidden because that would be an “unnecessary and wasteful” duplication of fast-food resources.

Typically, members of established hospitals sit on these CON approval boards and act as road-blocks and barriers of entry in favor of the entrenched hospitals. []

Under a free-market, it is consumers and producers who determine the number of competitors in a market.

CON laws short-circuit that process.

The result is that in times of pandemics their is a shortage of medical resources, such as with the COVID-19 epidemic that many states have temporarily suspended these laws. [2] How many lives would have been saved if medical entrepreneurs were not prohibited by the federal and state governments from expanding capacity prior to the pandemic?

In other words, the real and effective purpose of CON is to prevent and restrict competition and raising costs while lowering the efficiency and effectiveness of the U.S. medical care system.

Notes

[1] Christina Sandefur, “Competitor’s Veto: State Certificate of Need Laws Violate State Prohibitions on Monopolies”, Regulatory Transparency Project of the Federalist Society, February 26, 2020.
[2] Isabella Morales, List: 230 Regulations Waived to Help Fight COVID-19, Americans for Tax Reform.