At issue | March 30 Herald-Leader article, "UK defends opposing ICU for newborns; Official says action about care, not business"
Because Kentucky is a "certificate of need" state, its hospitals are granted beds and operating rooms by politicians, not by the laws of supply and demand. "Need" is arbitrarily defined by everything except market forces. Forget the lofty claims about patient care in the neonatal intensive care unit wars. CON laws are about one thing: creating and protecting monopolies.
Imagine Target asking permission from Frankfort to add another line of toilet paper, and Walmart lobbying to block the expansion because it already sold that toilet paper.
Hospitals have a financial interest in getting certified for additional beds, and they have an interest in preventing competitors from getting beds. When hospital systems merge, monopoly power expands and prices rise. Nobody likes tough competition. But competition makes businesses and institutions better, and it lowers prices.
Hospital beds are like any other commodity. When commodity suppliers compete, the price goes down. When commodity supply is arbitrarily limited or when the government imposes commodity controls, scarcity ensues and the price goes up. When a commodity is rationed and the price is controlled by the government, the laws of economics are suspended. Think gas lines of the 1970s.
There are two basic legal ways entities make money: the economic means by deploying capital and providing a good or service that consumers want, or political means by using the mechanisms of government to force people to buy their product. The former method requires vision, risk, hard work, cost controls and impressing customers. The latter method requires hiring lawyers and lobbyists and schmoozing politicians.
Companies hire lobbyists when they make the rational decision that they can make more money through political means than economic means. Convincing consumers to buy your product might be more expensive than getting the politicians to coerce consumers into buying it.
Excellence becomes irrelevant when customers are forced to buy a product.
One Kentucky surgeon who obtained a CON to operate a small outpatient surgery facility as an extension of his practice quipped: "All it took was hiring the right lawyer and spending a lot of money." That money would have been better spent on equipment and supplies for his patients.
As consumers of health care, we would be much better off if hospitals posted their fees and clinical results online and we abolished certificate of need laws. Patients could vote with their feet, and hospitals would live or die based upon the quality of the care they provide at a given price.
It is doubtful St. Elizabeth Healthcare, whose plan for a neonatal intensive care unit are being challenged by the University of Kentucky, would agree to that. It has its own beds to protect. St. Elizabeth should get a good basketball team and park the governor at center court.