Iowa’s ‘certificate of need’ law hampers health care access

University of Iowa Health Care recently prevailed in its spat against state regulators and neighboring hospitals. After years of planning and an initial rejection, a UIHC expansion in North Liberty finally earned a state panel’s approval this past week.

A public university operating the state’s largest hospital is hardly a sympathetic victim of the regulatory state, but UI’s plight gets at a more basic question — why do we let competitors stand in the way of health center expansions?

Iowa and 34 other states have “certificate of need” laws, which require health care providers to get permission slips from the government before they build new facilities or grow existing ones. The result is fewer choices and higher prices for patients.

It starts with a pay-to-play scheme where applicants have to cough up a fee equaling a portion of the project’s expected cost, up to $21,000. As part of the review, potential competitors are invited to offer their input, giving them an opportunity to object.

Conservatives who typically rail against regulation fall in line with hospital lobbyists.

Under Iowa Code, the criteria for approving an application include establishing that “Patients will experience serious problems in obtaining care … in the absence of that proposed new service.”

In other words, critics don’t have to prove the proposal would negatively impact Iowans. Instead, the applicant must prove that Iowans will be harmed by the status quo, a preposterous standard.

The five-member Health Facilities Council, appointed by the governor, evaluates the proposals and has the power to block development while offering little recourse for rejects except to reapply.

That’s what happened to UIHC this year. In February, the council denied plans for a 36-bed, $230 million hospital in North Liberty on a 3-2 vote, siding with other area hospitals that opposed the proposal.

UIHC reapplied with a similar application with a slightly larger capacity. Competitors again tried to sink the bid.

“It has the same potentially detrimental impact to the community hospitals piece, what we're here to talk about today, and represents the same governmental entity competing with private enterprise and competing with community hospitals,” a Cedar Rapids hospital executive said, as reported by The Gazette.

The argument about “private enterprise” posits the university as a big government operative infringing on the territory of mythic mom-and-pop hospitals.

Of course, there is no free market in health care. All the players in the sector are heavily regulated and benefit from government largesse. The prices are made up, shielded from public scrutiny and market forces by private insurers that the government once incentivized but now all but forces us to do business with. Certificate of need laws are just one more layer of protectionist cronyism on top of all that.

On second consideration, the Health Facilities Council approved the North Liberty plan on this past week with a 4-1 vote. UIHC, with its legions of lawyers and professional planners, is well equipped to overcome regulatory hurdles, but smaller providers don’t have those resources.

Jake Porter, a Council Bluffs resident appointed to the council last year, was a swing vote between February and August, saying he found UIHC’s follow-up application to be more detailed.

Porter, though, probably wouldn’t be upset if his fancy government position was made obsolete. He’s an organizer for candidates and causes within the Libertarian Party, which advocates to repeal certificate of need laws. Porter, a nominee for Iowa governor in 2018, hopes state lawmakers will at least look for ways to modernize the 1977 program.

In 2017, then-Gov. Terry Branstad pushed a bill to ease some of Iowa’s certificate of need requirements, part of a larger deregulation package that would have eliminated a few licensing requirements and state commissions.

“The established health care provider uses this as a way to keep out competition,” Branstad told The Gazette at the time.

That bill and others since have failed to make progress in the Republican-controlled Legislature, as conservatives who typically rail against regulation fall in line with hospital lobbyists.

Of all the counterintuitive, confounding and downright stupid rules imposed by policymakers and regulators, giving opposing firms a say in their competitors’ expansions must be one of the most striking. It is a form of central planning that invites bureaucrats and their industry allies to control the availability of vital services.

How does Porter, the oxymoronic Libertarian regulator, feel about the certificate of need process after being in the room where it happens?

“Same as I did before,” Porter told me.

(319) 339-3156; adam.sullivan@thegazette.com