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February 18. 2012 11:43PM

Hospital competition: Rethinking its regulation

Legislators are considering a bill that would allow for-profit cancer treatment centers to open in New Hampshire without having to clear two hurdles other medical centers have to leap. The bill would exempt these centers from the state's Certificate of Need law and Medicaid enhancement tax. Existing hospitals are hotly opposed, of course. They say such exemptions would give the newcomers an unfair competitive advantage.

That's a very interesting argument. Many of the hospitals whose executives make this assertion are themselves not-for-profit institutions. As such, they pay no property taxes and no state business taxes. (They do pay the Medicaid enhancement tax.) Their tax-exempt status gives non-profit hospitals a huge competitive advantage over for-profit medical centers such as the Cancer Treatment Centers of America (CTCA), which would be the initial beneficiary of the proposed legislative changes.

The state's Certificate of Need law also gives existing hospitals a huge competitive advantage.

It requires that new medical facilities and expensive device purchases be preapproved by the state based upon “need.” This restricts competition because anyone trying to provide a new service must first prove to the state that the service is needed. Imagine if we treated, say, restaurants or snow plow contractors that way. Prices would be higher, choices limited. You might have only one Italian, one Mexican and one Greek restaurant in your area because the others wouldn't be “needed.”

By statute, the Medicaid enhancement tax applies to all hospitals, and CTCA refers to its own facilities as hospitals, so it is hard to see why it should avoid that tax. It is also hard to see how Granite Staters would be harmed by having another option for treating cancer. To even the playing field, the solution would seem to be relaxing the Certificate of Need laws rather than expanding them.


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