Delaware Health Care Supply Needs Competition

When suppliers in a market are protected from competition they can charge higher prices since supply is restricted. They are also often less efficient, adopt cost-saving technology more slowly and provide lower-quality services.

Certificate‑of‑need (CON) programs are one way states restrict new health care capacity, but there is little evidence that they control costs or improve quality and access. Instead, they often function as anti‑competitive supply‑side barriers.

What is a Certificate-of-Need (CON) Program?

Under this program applicants must establish to the state that there is a need for additional capacity before a certificate is granted to build additional health care facilities or make major equipment purchases. This was due to a mistaken idea that excess capacity raises prices. According to the U.S. Department of Health and Human Services, the U.S. Department of the Treasury and the U.S. Department of Labor, there is little evidence that health care costs were restrained or quality and access improved, and the federal government subsequently eliminated the incentive to establish CON programs in 1987 after creating it in 1974.

Instead, CON laws proved to be a handy barrier to competition for existing health care suppliers. For this reason, the Federal Trade Commission and the Anti-Trust Division of the U.S. Department of Justice urge the elimination of state CON programs, and cite specific instances of anti-competitive behavior by suppliers that were facilitated by CON regulations.

Are There Benefits to CON Programs?

This approach is equivalent to denying a grocery store like Walmart a permit to build because there are already enough grocery stores in the area. If more efficient, lower-cost stores can enter, then less efficient existing stores must either improve or close. This is how Walmart’s entry into groceries lowered prices and helped families stretch their paychecks further in the 1990s, according to a finding of a National Bureau of Economic Research study by economists Jerry Hausman and Ephraim Leibtag.

Industry groups argue that new entrants will serve only patients with commercial insurance, leaving Medicare, Medicaid, and low-income patients for the (presumably less efficient, lower quality) existing suppliers. Reduced access, lower quality and higher spending flies in the face of economic theory, which states that increasing supply through competition does the opposite. So what does the evidence say?

A recent meta-analysis by economist Matthew D. Mitchell reviewed 128 academic papers containing 450 tests comparing states with CON laws to those without. Mitchell finds the balance of the evidence is that CON regulations increase spending, reduce quality and reduce access to care, including access for underserved populations. Another study by economists Thomas Stratmann, Markus Bjoerkheim and Christopher Koopman directly tests the cream-skimming hypothesis for ambulatory surgery centers (ASC). It finds that access improves, including in rural areas, and that rural hospital closures do not increase in states that repealed CON regulations.

Delaware's Certificate of Public Review (CPR) Program

The certificate-of-need program in Delaware is known as the Certificate of Public Review (CPR) program which covers the construction or establishment of any health care facility, the acquisition of a nonprofit health facility, the expenditure of more than $5.8 million by a health care facility (with some exceptions), a change in bed capacity of 10 beds or more than 10% of licensed capacity (whichever is less), and the acquisition of major medical equipment (excluding replacement and with some exceptions).

The review process, conducted by the Health Resources Board, considers the “need of the population,” the effect on existing providers, the effect on cost and quality of health care, and the availability of less costly or more effective alternatives in or out of state and coordination with the Delaware Health Resources Management Plan, according to a 2021 staff report to the General Assembly. Applicants must provide demographic data, utilization rates of existing providers, expected impacts on those providers, extensive financial data and any studies or analysis they conducted in deciding to file the application.

Delaware’s CPR program is an anti-competitive barrier. Undue weight is given “current capacity,” i.e., existing providers. Applicants must provide highly detailed data, which will be made public thereby possibly giving away competitive advantage. Applications can be denied on a wide range of factors. Although only two applications of 28 were denied (2014-2020), there are no data on deterred applications. Moreover, delays in obtaining certificates can substantially increase the cost of expansions. Only six applications of 30 were decided in under 90 days.

Attempts to Reform Delaware’s CPR Program

In March 2021 the Joint Legislative Oversight and Sunset Committee staff conducted a review of the performance of the Health Resources Board. The 15 board members are appointed by the Governor and consist of many industry insiders, as might be expected. In fact, so many members must recuse that the board has difficulty in getting a quorum of eight to vote on applications. Thus, decisions are delayed. More disturbingly, records of votes by members are incomplete or missing. These problems paint a picture of a regulatory agency heavily influenced by industry insiders with the goal of reducing or eliminating competition.

The principal staff recommendations of the Joint Legislative Oversight and Sunset Committee are to: 

1. change the Health Resources Board to an advisory board that assists the applicable department in Delaware Health and Social Services; 

2. create a statewide database of health care facility utilization levels; 

3. reduce the membership of the Health Resources Board to five to seven members. 

None of these recommendations eliminates the anti-competitive effect of Delaware’s CPR program. 

“I can't get an appointment until next month

“I can't get a cancer appointment for three months”

“There are no appointments for months”

We have all heard these complaints from our friends and family members. These complaints are real and widespread. A 2025 West Health-Gallup survey ranks Delaware 46 out of 51 for overall health care experience and 48 out of 51 on cost and access (50 states plus the District of Columbia).

At the Caesar Rodney Institute we have also heard from health services providers. “We don’t want to come to Delaware because of the CON law. It isn’t worth the investment to risk approval.” It is clear that the current program has been dominated by industry insiders who make decisions without basis in data and with no public scrutiny or accountability. The chilling effect of the mere existence of the CPR program on new entrants is very real. But it leaves no data because they never applied.

Curiously, there is no public advocacy for the persistence of CPRs. Most support for keeping the CPR law appears to come from private lobbying, rather than public forums. Unfortunately, this law has harmful, anti-competitive effects with its artificial regulatory barrier persisting due to lobbying.

Delaware’s citizens suffer from a lack of available health care services, which in turn contributes to higher prices and weaker pressure to improve quality. That is the nature of limited supply. By all of the available data, research, and metrics CPRs do not work as intended. The CPR program adds nothing to enhance the cost, quality or access to health care in Delaware and there is plenty of evidence that CPR programs reduce these. Efforts to reform it have failed. It is past time to repeal Delaware's Certificate of Public Review law.