The Impact of Virginia’s Certificate of Public Need Laws on Nursing Home and Home Health Care Availability and Expenditures

by James C. Sherlock

I have come across a major study in the National Institute of Health’s National Library of Medicine that made a point that I have not explored sufficiently to this point.

It discusses the intersection of nursing homes, home health care, CON laws like Virginia’s Certificate of Public Need (COPN) law, and Medicaid expenditures.

I have shown over time in a series of columns how bad many of Virginia’s nursing homes are.

Antitrust authorities at the Federal Trade Commission (FTC) and at the US Department of Justice (DOJ) have long taken the position that CON laws are anticompetitive.

This study, conducted prior to COVID, indicates that COPN administration will ensure that nursing facilities not only have little competition from other facilities, which it was designed to do, but also will limit home health care expansion, which the COPN law does not mention.

That is very good for the Virginia nursing home industry.

It is bad for every other Virginian, every one of whom may need at least post-operative recovery and rehabilitation if not long term care.

Some will need it in a dedicated facility, others can be better served at home.

The study indicated that COPN will tend to make home health care less available and potentially raise total Medicaid spending. It also showed that market forces unconstrained by CON laws like COPN will tend to reverse those trends.

So this article is dedicated to our politicians and their constituents.


Some of the language from that report:

“Compared with states without CON laws, Medicare and Medicaid spending in states with CON laws grew faster for nursing home care and more slowly for home health care.

“Thus, controlling for other factors, public postacute and long-term care expenditures in CON states have become dominated by nursing homes.”

During our study period, we observed an expansion of Medicare-paid postacute care which took place in the form of skilled nursing facility care in CON states and in the form of home health care in states without CON.

This implies that if CON laws remain in place when demand for long-term and postacute care increases in the future, nursing home–based care will grow at a relatively faster rate than community-based care in CON states.

This increase in nursing homes conflicts with federal home- and community-based care initiatives.

Though we did not find any effect of CON on aggregate spending, since the cost of nursing home care is higher than the public cost of home-based care, persistence of CON laws may increase future aggregate spending.

“To conclude, states with CON laws experienced faster growth of Medicare and Medicaid spending on nursing home care and slower growth in spending on home health care than states without CON laws.

At a minimum, CON laws related to home health care act as a direct impediment of expansion of home- and community-based care.

CON laws provide nursing homes some degree of market power that does not allow the market to respond freely to price changes or federal policies.”

Bottom line. The problem is fairly stated. A solution is at hand.

Eliminate nursing homes from review by COPN administrators. A bill can be submitted this year to repeal that portion of the law.  Virginia’s citizens will be the winners.

The licensing and inspection processes will remain in place.

I have become convinced that Virginia’s government health care establishment under current leadership is working hard to use those processes to improve the quality of both nursing facilities and home health agencies.

Those two steps will truly be a win-win for all of us.