NCPA - National Center for Policy Analysis

Florida Restricts Health Care Competition

May 7, 2002

Florida has a law that is a relic of 1960s' attempts to "rationalize" health care markets on the theory that competition is "wasteful" and drives up costs. Under the law, Florida requires new medical facilities or services to obtain a Certificate of Need (CON) from the state. The law hampers competition in the health care marketplace, say analysts, which harms consumers.

CON emerged because insurers were alarmed that Medicare and rapidly developing medical technology would push up costs. They proposed a governmentally enforced equivalent of a market feasibility study for any new, expanded or enhanced medical delivery system prior to its being undertaken. Any provider who wished to undertake any capital projects or to expand services would first have to obtain a permit to do so from a governmental entity.

  • The federal government mandated the establishment of local councils to control health care delivery.
  • By the 1980s, it became apparent that the process was not controlling costs; but it did provide some health care providers with a competitive advantage over others, and served to restrict consumer choice.
  • Furthermore, the insurance reimbursement process had changed, with the retrospective cost-plus plan in force when CON originated rapidly being replaced by a prospective payment plan that worked to encourage conservative care.

In 1986, the federal government repealed the mandate that all states have a CON process in place; but Florida and some other states did not drop their CON requirement. Attempts to limit the application of CON have continued since 1986, including a full repeal proposed but not passed in 2001.

Source: Peter Doherty, "Certificates of Need: A Primer on a Program That Needs to Go," Journal of the James Madison Institute, Fall 2001.


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