August 29, 2022

When Katie Chubb’s baby was due in early 2020, her husband Nicholas had to drive her from Augusta, Georgia, where they live, to a freestanding birth center in Atlanta — nearly 150 miles away.  During her pregnancy, she made 15 round trips to the center for prenatal care.  The Augusta area does not have centers for natural childbirth, so from her own experience, Chubb saw an opportunity for a small business to provide a much-needed service and decided to set up one.  But Georgia has denied the center permission to operate, so she is suing the state because the reason for denial — while valid under current state law — is unreasonable by the norms of free-market economics and violates important individual rights.

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Imagine the authorities denying Wells Fargo permission to open a branch because the local Bank of America tells it the new outlet isn’t needed, as it would duplicate BoA’s services.  Seems unthinkable.  But Certificate of Need (CON) requirements in health care, created in the 1960s and in operation in 35 states and Washington, D.C., demand that hospitals in an area endorse the need for a new hospital or health care facility, even for the acquisition of new equipment.

For freestanding birth centers, which are legal in all states, CONs are required only in 15 states.  Such centers aren’t hospitals, but they handle low-risk deliveries on a midwifery and wellness model.  They do not provide general anesthesia or perform Cesarean sections or other surgical procedures.  Some offer alternative practices like water birth and lotus birth, with relaxing music playing and paternal participation in the process.  A doctor is on board for supervision and early identification of complications, and the centers typically have hospital transfer arrangements for emergencies.  Less expensive than hospitals, staffed with trained nurse-midwives, they provide a hygienic, low-stress setting for delivery.  Many women choose them over hospitals, and in poor or rural areas without hospitals, they serve to bring down infant and maternal mortality rates.

Actually, permission for Chubb’s Augusta Birth Center (ABC) wasn’t thwarted by direct denial of need.  The state agreed there was a need for a birth center in Augusta.  There is no such facility within a 130-mile radius, the three local hospitals in ABC’s vicinity lack sufficient beds, and it’s not uncommon for women to give birth in hallways and closets.  But CON rules require that birth centers obtain transfer agreements with local hospitals for emergencies.  The three hospitals simply refused to sign transfer contracts, saying the center duplicates their services.  So, although Chubb has secured funding and a building for the center, staffed its board, signed on a physician with admitting privileges at two hospitals to be present during all deliveries, and contracted an ambulance service, her center has failed to get state approval.

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The center’s case (Chubb and ABC v. Noggle, Laing and Boyd), in the District Court for the Northern District of the Georgia Atlanta Division, is being argued by the Pacific Legal Foundation.  Its attorneys say that CON requirements violate the Due Process Clause of the Fourteenth Amendment, which protects individual freedom from unreasonable or arbitrary government interference, including the right of mothers to choose the place and manner of giving birth.

And though the ABC lawsuit does not invoke Washington v. Glucksberg, the assisted suicide decision of the Supreme Court might arguably be cited as using history and widespread practice as one criterion for deciding whether or not something is a right.  By that token, all three rights — choosing how and where to give birth, providing a birthing service, and earning a livelihood — stand validated.

ABC’s lawsuit also argues that, in an emergency, risk to a pregnant woman would not be heightened for lack of a transfer agreement, because the Emergency Medical Treatment and Labor Act (EMTALA) of 1986, a federal law, requires hospitals to stabilize and treat anyone brought to their emergency departments.  So it’s meaningless to deny a birth center permission to operate just because local hospitals — fearing competition — refuse to have transfer agreements with it.  Besides, transfer agreements aren’t really about improving outcomes, for it is being required only of birth centers, not of ambulance services or in cases of emergencies during at-home deliveries by unlicensed midwives.

How did CONs — which are patently against the American spirit of a free market and competition that benefits consumers — come to be?  In a 2015 issue of Antitrust, Maureen K. Ohlhausen, then commissioner of the Federal Trade Commission, wrote that in the 1960s, high health care costs were seen as the result of overinvestment and duplication of services.  So CONs were introduced to require that if one hospital in an area already had expensive equipment, useful in just a few cases, other hospitals had to prove the need to invest in another one to provide service in the same area.  Reimbursement for treatment by health insurers and employers was on a “cost plus” basis, she writes, so there was no incentive to avoid overspending to buy unnecessary equipment or set up new hospitals.  State intervention was therefore seen as necessary.

As early as 1964, New York State restricted hospital construction with a CON law.  Hospital networks then lobbied for all states to have CON laws.  In 1974, the National Health Planning and Resources Development Act (NHPRDA) mandated that all states introduce CON laws if they were to receive federal funding, and by 1980, Louisiana was the only state without one.  By 1986, seeing that the legislation created barriers to entry that limited competition and led to rising health care costs, Congress repealed the NHPRDA which meant that states were free to terminate their CON programs, although few did.

CON laws exist despite study after adverse study.  A fact sheet from the American Medical Association finds CONs raising costs and reducing quality of care.  The American Association of Birth Centers (AABC) states that CON laws stunt the growth of a proven, high-value care model that has been shown to improve outcomes and reduce costs.  A study by Stratmann and Koopman finds that CON states have 30% fewer rural hospitals and 13% fewer ambulatory surgical centers.  In 2004, the Federal Trade Commission said CON laws shield incumbent health providers from those seeking to expand patients’ access to health care, discourage innovation and efficiency, and are a mechanism for conferring political favors.  Even the Department of Justice has said time and again that CON programs are an anticompetitive risk and declared that health care needs the competition that benefits consumers by reducing costs.  Some of the studies mentioned are summarized here, in a report on Vermont’s CON laws.