Business & Economics

The Real Cost of CON Laws: Quality of Care Under Pressure During the Pandemic

A physical therapist’s efforts to better serve patients in their homes are thwarted, first by a state-wide moratorium, then by a CON law

Image Credit: Marko Geber/Getty Images

“Without CON, I could be a lot more nimble in meeting the needs of patients in underserved areas. Many physical therapists just go in and do a little exercise with a client. I would like to go in and look at the musculoskeletal system, take into account all of a patient’s problems and try to resolve those issues so they can get back to normal activities. Then, in the process, we would reduce the cost of healthcare in that area, because in the long run if people are able to overcome their disabilities, then they can do more and are less likely to get sick.” — Charles “Butch” Slaughter, physical therapist

For a long time, Butch Slaughter didn’t really give certificate-of-need (CON) laws and their implications much thought. He was too busy running a successful physical therapy clinic in the populous city of Jackson, Mississippi. But with the advent of the COVID-19 pandemic, all that changed. Suddenly, he felt the encroaching impact of state regulations on his hopes to diversify his business and meet the needs of a growing number of homebound patients.

A physical therapist for 45 years, Butch started out in college studying chemical engineering, but he switched to physical therapy because he wanted to work with people. One of the first graduates of the physical therapy school at the University of Mississippi, he soon realized he’d made the right choice. Physical therapy allowed him to connect with a diverse clientele in a variety of settings—the elderly, chronic pain patients, athletes, people with everyday ankle and foot injuries.

Caretaker assisting senior man with walker. Image Credit:
FG Trade/Getty Images

Because many of Butch’s patients are homebound, have mobility issues and are concerned about exposure to the virus, he could see a growing and unmet need to provide physical therapy services to patients in their homes. This need was especially apparent in the southern part of the city of Jackson, where many residents have low incomes and don’t receive adequate health services. Butch wanted to be able to treat patients in his regular clinic but also to offer house calls for patients who prefer or need to receive treatment at home. And thus began his struggle to open a home health agency.

As a certified physical therapist, Butch can already legally go into a patient’s home and provide treatment, something he often does through physician referrals. But this is not a profitable business model, as it requires Slaughter himself to do all of the work for each patient he treats at home. A home health agency would allow him to hire physical therapy assistants who could conduct the initial patient evaluation and then, after Slaughter followed up with a plan of care for the patient, visit regularly to provide physical therapy.

Photo of Butch Slaughter. Image Credit: Mississippi Justice Institute.

With the COVID-19 stay-at-home orders, there should be a burgeoning market for home health agencies—in Mississippi and everywhere else in the country. But Butch hadn’t considered how CON laws might stand in the way. Certificate-of-need laws require businesses to prove that there is a need for their services and that opening, expanding, relocating or even changing ownership of a facility will not financially hurt competing healthcare businesses. Obtaining a CON is an expensive, tedious, drawn-out process, and it has nothing to do with whether the new business is safe, is sanitary or provides high-quality services. But before Butch could apply for a CON, he had an even bigger hurdle to clear: a ban on starting new home health agencies has been in place in Mississippi since 1981. Mississippi is one of only two states in the country—the other is Vermont—that has such a ban.

For 40 years—almost as long as Butch has been practicing—the only way to enter the home health market in Mississippi has been to purchase a previously issued CON from the owner of an existing agency. However, says Slaughter, even if the home health agency ban were lifted,

I’d still have to go through the CON process, which is very expensive and makes no sense for home health agencies, because to start one of these agencies doesn’t require a large expenditure of capital or a massive hospital building or lots of equipment. All you need is a car. But if the CON and ban were lifted, you could open a home health agency with, let’s say, a physical therapist, an occupational therapist, a social worker, a nurse and maybe a couple of aides, and they would all be under one roof. We could be a lot more nimble in meeting the needs of these underserved areas. One of the biggest problems we have in Mississippi is limited access to healthcare.

CON laws have been shown time and time again to limit consumer choice, stifle competition, impede innovation and compromise quality. The home health agency is just one of 19 healthcare services and facilities for which Mississippi requires a CON. Although Mississippi’s Department of Health argues that CON laws play a central role in planning the state’s health services based on need, location size, etc., and that they help to keep healthcare costs under control, there is much evidence to the contrary. Mississippi could save as much as $208 per capita annually if it repealed its CON program. CON laws amount to protectionism, where the government exceeds its proper role by passing a law that protects existing businesses from legitimate competition.

Physical therapist training two senior women outdoors. Image Credit: amriphoto/Getty Images

For many patients, especially elderly individuals, being treated at home is no small concern. The Centers for Disease Control (CDC) reports that in 2018 alone, more than one in four older adults in the U.S. took a fall, and more than eight million required medical attention as a result. These patients may have mobility, balance or neurological issues that make it challenging for them to travel to a clinic or a hospital. And many physical therapists also work with people who are recovering from an injury, a joint replacement surgery or challenges following a stroke, where home healthcare is not simply more convenient: it is advisable, even necessary.

There are also psychological reasons for in-home treatment. Older people just feel safer and less vulnerable when they are treated in their own homes. In an article for the Flagstaff Business News, physical therapist Chad Moore talked about the advantages of working with patients in a controlled, comfortable environment, especially during COVID-19: “By working with my clients in their homes, I can develop a plan of care that incorporates their living environment to their specific goals to help reduce fall risks and prevent future injuries.”

This type of “functional medicine” approach utilizes clients’ own living space—often taking advantage of props and furniture in the home that are right at hand—so that they can do rehab exercises in an environment that is familiar and safe to them. This has been shown to be very effective at returning patients quickly and seamlessly to their regular routines.

And now there is a new and growing concern: as the elderly population continues to grow, home healthcare agencies can play a huge role in keeping these patients out of nursing homes, where they are far more vulnerable to disease and thus more likely to die. This has become especially true since the advent of COVID-19. In fact, one of the grimmer statistics released recently is a November 2020 report indicating that in 49 states and the District of Columbia, 100,033 residents and staff at long-term care facilities have died from COVID-19—roughly 40% of all COVID deaths up to that point. But if elderly patients can be treated at home, they are not forced to go to clinics where their exposure to the virus—and any other communicable disease—is much greater.

In late 2020, Butch Slaughter decided to take action, becoming the plaintiff in a federal lawsuit filed by the Mississippi Justice Institute, a nonprofit public-interest law firm. This firm’s aim is not simply to lift the state’s long-standing moratorium on establishing new home health agencies, but to also repeal the state’s outdated CON law.

Aaron Rice, the attorney representing Slaughter through MJI, points out that the only winners in the current situation are typically the home health agencies that already exist. “They win because they keep their competition away and they can control the costs of treatment. Everybody else loses. The people of the state of Mississippi and other healthcare providers lose.” Indeed, even some of the currently active home health agencies continue to be at the mercy of the ban and the CON. Since the lawsuit began, two existing home health agencies have reached out to Rice because they want to expand their services and the territory they serve. Unfortunately, they also are prohibited by the ban and thwarted by the CON.

This article is the fourth in a series that looks at the real-world cost of certificate-of-need (CON) laws. The first article in the series focuses on how CON laws interfere with care and treatment options for patients. The second article focuses on how CON laws prevent businesses from serving the urgent needs of customers of healthcare services. The third article shows how difficult it is for a new healthcare provider to obtain a certificate of need.

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