Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC, Justice Department recommend repeal of Alaska certificate-of-need laws, (Apr 12, 2017)

By Linda O’Brien, J.D., LL.M.

The FTC and the Department of Justice Antitrust Division have recommended that Alaska repeal its certificate-of-need (CON) laws, which require health care providers to obtain state approval before expanding, establishing new facilities or services, or making certain large capital expenditures.

In response to a request by the state legislature for comments on Alaska Senate Bill 62, which would repeal the Alaska CON laws, the joint statement suggested the state consider whether its CON program best serves the needs of its citizens. Although requirements vary for those states that have CON laws, they typically require certain health care providers to obtain approval from a regulatory body before expanding, establishing new facilities or services, or making certain large capital expenditures.

According to the joint statement, the FTC and Justice Department historically have urged states to consider repeal or reform of their CON laws because they can prevent the efficient functioning of health care markets and harm consumers. CON laws can create barriers to entry and expansion, limit consumer choice, deny consumers the benefit of an effective remedy for antitrust violations, facilitate anticompetitive agreements, and stifle innovation. Further, CON laws have not generally succeeded in controlling costs or improving quality.

Under Alaska’s CON program, a party must obtain a certificate of need before spending $1.5 million or more to construct a health care facility, alter the bed capacity of a health care facility, or add a category of health services provided by a health care facility. Competition in health care markets can benefit consumers by containing costs, reducing prices, improving quality, and encouraging innovation. However, CON laws may suppress these substantial benefits of competition by limiting the availability of new or expanded health care services. Although states must weigh a variety of policy objectives when considering health care legislation, CON laws raise considerable competitive concerns and generally do not appear to have achieved their intended benefits for health care consumers, the joint statement noted.

"CON laws raise considerable competitive concerns and generally do not achieve their alleged benefits for health care consumers," said FTC Acting Chairman Maureen K. Ohlhausen. "CON laws can restrict entry and expansion, limit consumer choice, and stifle innovation. Additionally, the CON process can be exploited by incumbent firms to thwart or delay entry by new competitors, as well as potentially obstruct efforts to restore competition lost to an anticompetitive merger, harming free markets and consumers."

"Alaska lawmakers have the opportunity to bring lower costs and greater options to health care consumers," stated Acting Assistant Attorney General Andrew C. Finch of the Antitrust Division. "CON laws can increase the costs of investing in new health care services and can shield incumbents from competition. Repeal of Alaska’s CON laws could invigorate competition in this critical sector, to the benefit of patients, employers, and other health care consumers."

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