Certificate of Greed

How screwed-up is the economics of our healthcare system? So crazy that stuff like this happens all the time:

The proposal by Vista Health System to build a $131 million hospital in Lindenhurst would add more beds to an area that already has a substantial surplus, according to a report released today by the staff of the state health care facilities board.

The plan by Waukegan-based Vista to build a 132-bed facility 13 miles west of its existing facilities would increase the oversupply of hospital beds in Lake County, which already has 86 more beds than needed, according to a report by the staff of the Illinois Health Facilities and Services Review Board.

In other words, in an era of rising healthcare costs, the Illinois Health Facilities and Services Review Board (who can’t even keep a website running as I write this) is worried that people might have access to too much medical care, to the tune of 86 hospital beds in a county with a population of 700,000 people.

Supposedly, the purpose of the Illinois HFSRB is to lower healthcare costs by preventing “over-investment” in healthcare facilities, which would somehow drive up healthcare costs, despite the fact that increasing the supply makes the price drop for every other good and service in the world. It’s hard to see how this is anything other than the government protecting the interests of existing hospitals at the expense of new hospitals and of patients.

Well, it does serve one other purpose… It’s an opportunity for graft by the board members who get to control the permit process for billion-dollar corporations:

[The Illinois Health Facilities and Services Review Board] was embroiled in scandal when federal authorities in 2005 indicted Stuart Levine, a former board member who later pleaded guilty to using his position to squeeze hospitals for favors, kickbacks and contributions for his political friends. The same investigation led to the conviction of former Illinois Gov. Rod Blagojevich.

If the CEO’s of a bunch of hospitals got together and conspired to limit the number of hospital beds in the market, they could increase their profits tremendously by reducing price competition. However, that would be a cartel, which is a crime under U.S. anti-trust laws. They might still make some back-room deals — with promises and handshakes — but they couldn’t enforce those deals, and they couldn’t prevent outsiders from entering the market and driving prices down.

But if the hospital CEOs can get the state legislature to set up a regulatory board that is specifically allowed to limit the number and size of hospitals, that’s called a Certificate of Need, and it’s completely legal. It’s the state-wide cartelization of the hospital market, and it’s enforceable even against outsiders entering the market. It’s exactly what a bunch of greedy conspirators would want.

It’s also the law in 35 states.

Eliminating the Certificate of Need requirements is one of the most obvious steps to reduce healthcare costs, and not doing anything about it is one of the biggest failings of the Patient Protection and Affordable Care Act (Obamacare). How can you pass a law that’s supposed to give us easier access to healthcare while leaving in place a system specifically designed to limit the availability of healthcare?

One response to “Certificate of Greed”

  1. Jason

    The irony of life can really be a big joke. In this case, it makes everyone frustrated that they seem to be promising something but they end up giving away another. It makes me just want to shake my head at how greedy politics can be even when it comes to issues like this.

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