No Place for Health Care in a Free Market Economy

Last week, Florida State Senator Rob Bradley, State Senator Rob Bradley  introduced legislation (SB 676) which seeks to repeal the Certificate of Need program here in Florida. Despite the potential for an increase in cost and decrease in quality, that would come with deregulation, Governor Rick Scott has expressed his support of the legislation.

As I have explained in my previous posts, the Certificate of Need program is a regulatory process that requires certain health care providers to obtain state approval before offering new or expanded services. The CON program in Florida regulates the construction of new hospitals, hospices, skilled nursing facilities, and care facilities for the developmentally disabled, as well as certain hospital services.

As you also know, I oppose the deregulation of CON, in particular as it relates to the creation and expansion of inpatient care. I have outlined in significant detail the negative effects deregulation of CON would have in previous posts but in short, I believe it will have a negative impact on cost, quality and access to health care in our state. However, Senator Bradley, Governor Scott, and those who support the elimination of CON believe that free market forces will improve quality while lowering costs.

And while I staunchly believe in free market economics, the reality is that health care does not operate in a free market space. In a free market economy, prices, quality and quantity of goods and services are determined by the open market and consumers.  In addition, the government imposes very little - if any - restrictions and regulations on the forces of supply and demand that drive the costs of goods and services.

Hospital pricing cannot be determined by a free market system because a hospital cannot set their own pricing for services. Hospitals are reimbursed for services based on rates established by the Centers for Medicare and Medicaid and thus, must work with insurance providers and government agencies to negotiate wholesale pricing. In addition, hospitals cannot provide or deny services based on a patient’s ability to pay, making the system of supply and demand irrelevant. For example, if a patient comes to the ER requiring stiches, federal law requires that they be treated even if they do not have insurance or the money to cover the cost of the treatment they received.

Additionally, hospital and health care pricing is also incredibly complicated and there is a scarcity of price information out there for consumers. This makes shopping for certain types of health care services incredibly difficult and many times, consumers won’t know exactly what they owe for a procedure until they get the bill. There also tends to be significant variety in pricing from provider to provider and cost does not always directly correlate to quality. This is yet another complication when it comes to health care in a free market space.

When new hospitals come into the region due to deregulation, they will look to compete for patients with insurance coverage or the financial means to pay for their own care. And so, while I am a big believer in free market economics and know the positive effects it has on many sectors of our economy, free market economics and deregulation simply don’t work when it comes to health care. Despite the belief of those who support the legislation, it will drive up costs and decrease quality. Take it from someone who has been working to provide quality health care to the consumer for the past 20 years.

And so what, now? As I have said before, I think here in Florida we can buck the trend, put party politics and ideology aside and come together in the spirit of doing the right thing for our State when it comes to access to high quality and affordable health care. I don’t think we need to rush bills into the legislature but instead, we can sit down at the same table and thoughtfully and engage with each other to work towards a positive outcome that puts consumers and our neighbors first.

It is in this spirit that I want to challenge our legislators to put together a statewide “blue ribbon” working group comprised of legislators, health care leaders, physicians, medical professionals and patient advocates. This mission of this group will be simple: to come together, roll up its collective sleeves and work toward providing the highest quality and most affordable health care for this State’s most precious resource—Floridians.

Finally, if you are concerned about how the deregulation of CON and specifically, Senate Bill (SB 676) will affect your access to high quality and affordable health care, I encourage to reach out to your legislatorsand make your voice heard.

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The Cost of CON

I continue to receive a great deal of feedback as a result of my blog posts on the potential deregulation of the Certificate of Need (CON) in Florida, and so I wanted to talk in more detail today about how the removal of this law can affect consumers.

As I explained previously, there is no conclusive evidence that deregulation improves quality, cost or access to health care. In fact, many believe that costs are lower in states regulated by CON, because CON operates on an economy of scale model. Economy of scale in microeconomics is the principle that there is a proportionate saving in costs gained by an increased level of production. Thus, facilities that operate in CON states are more likely to perform a greater number of procedures than their counterparts in non-CON states due to there being fewer hospitals within a given area. Following this economy of scale principle, CON state hospitals can offer their procedures and services at a lower cost due to increased volume.

One of the states that has experienced the negative effects of the absence of a CON law is Texas. Specifically, in the Dallas-Fort Worth market, deregulation has driven up costs and resulted in an oversaturated market of medical facilities and services. In 2013, the Dallas-Fort Worth market was in the midst of an explosion of hospital construction and expansion as well as physician-owned health care businesses. However, despite this fact, health care costs have remained significantly higher than other markets as facilities had to increase prices to cover costs in their flooded environment.  Finally, the region has experienced a proliferation of free standing Emergency Departments, which has not only caused a strain on the medical workforce and finite resources but has also driven up costs.

As I have said before, deregulation of CON remains a vitally important issue affecting all members of our community, especially those that are most vulnerable. I encourage you to remain engaged - repost, tweet and share this discussion. You may also reach out to me directly at JCouris@jupitermed.com and offer your thoughts. I look forward to working on this initiative together.

Let's Talk about CON

Since my last blog post went up Tuesday morning, I have received numerous calls, texts and emails from readers who are enthusiastically engaged with the topic of the potential deregulation of the Certificate of Need (CON) in Florida. 

As I explain in my previous post, our primary goal at Jupiter Medical Center is to provide our patients with the highest quality and most accessible health care at the fairest price possible. With that in mind, there is no conclusive evidence that deregulation improves quality, cost or access to health care. In fact, I believe that it puts all three at risk. Deregulation will result in higher cost to consumers as well as decreased access to care especially in the poorer rural communities.

I realize it isn't productive to simply state my opposition to deregulation. Instead, I have spent significant time trying to think about opportunities to affect a positive outcome. To that end, I recommend the following:

1. If the government wants deregulation in health care, they should find ways in which to make it easier for health care providers to offer ambulatory services, as this type of care is often designed to provide services to consumers via a retail-like experience. Let’s create a system where the State of Florida incentivizes providers to build a world-class ambulatory network across the state with the appropriate controls in place.
2. Our legislative leaders in Tallahassee should assemble and convene a bi-partisan workgroup comprised of patients, health care leaders and legislators. I recommend that they task them with both defining the problems and offering solutions to providing high-quality, accessible and reasonably-priced health care in our state. We need to move away from ideology and politics so we can focus on the responsibility of caring for the health and wellness of our community and neighbors. I will be the first to sign up to help.

This is a vitally important issue affecting all members of our community, especially those that are most vulnerable. I encourage you to remain engaged - repost, tweet and share this discussion. You may also reach out to me directly at JCouris@jupitermed.com and offer your thoughts. I look forward to working on this together.