Bill To Limit Unneeded Hospital Construction Introduced

Needed Or Not, New Hospitals Are Being Built

A new bill to limit the construction of unneeded hospital building has been introduced in Indiana. The reason this should be important to you is that the new hospital construction continuing across the nation carries with it many harmful side-effects. Sen. John Ruckelshaus, R-Indianapolis, referred to the boom in hospital construction in recent years as a “hospital arms race.” Under a bill before the Indiana legislature, State lawmakers might try to limit hospital construction. Ruckelshaus is worried about hospitals clustering new construction in high-wealth areas and that it will ultimately drive up the cost of health care for Hoosiers.

This is part of the same old story, when money is cheap and funds are readily available, many CEOs, and the board of directors of large, often quasi-government concerns, rush to construct monuments that will stand as a legacy to their greatness. We are talking about "overbuilding" which means facilities sitting half empty and the cost being transferred in some way or form to the community and others. Let me make it clear, this is not a problem just in Indiana but such construction has been on a tear across the nation fueled by low-interest rates, government expansion of healthcare, and demographics. In many ways this speaks volumes as to the economic revival of America post-2008 and Americans have the healthcare bills to prove it.

Hospitals Are Difficult To "Re-purpose"

Another motivation behind much of the "build new" in a high-income area and tear down your old facility is the fact hospitals are interested in drawing "private pay" patients which in turn makes it harder for other hospitals who then are left with most of the low-income patients. This again is not about using healthcare money in the best way but gaming the current system and how it is rigged. It also does not take into consideration the damage it inflicts upon the areas where hospitals are closed. History shows that the loss of these huge employers can devastate a community dropping property values and opening the door for a slew of social ills.

Ruckelshaus has a valid point when he argues that hospitals aren't truly part of the free market system because much of the money that flows through their system is from the government by way of Medicare or Medicaid covering seniors, the poor and people with disabilities. Senate Bill 573 would require projects of more than $10 million to obtain a Certificate of Need from the Indiana State Department of Health. Currently, new projects must go through health and safety checks to be certified as a hospital but don't need a certificate of need. At this time at least two major Fort Wayne projects are in the works that could be affected.


As expected, the hospital association opposes the bill and so will those in the construction trades and suppliers ready to gain from these projects. Indiana used to have a Certificate of Need when federal regulations required it but repealed it in the early 1990s. Brian Tabor, president of the Indiana Hospital Association, said more than 30 states have a certificate process but the trend is moving away from that. He noted Wisconsin has dropped its requirement and New Hampshire repealed its law. Tabor claims “Competition and market forces are at work with hospitals,” he said. “It's service based. The dollars follow the patient.”

Since the bill would affect not just new facilities but also repairs and remodeling costing $10 million or more. Tabor said the bill would create an environment where projects end up being litigated, drawn out and you enter into a realm of very subjective decision-making. He said many of the construction projects around the state are replacement facilities, such as an expansion/renovation project at Cameron Memorial Community Hospital in Angola. Lutheran Health Network also plans a $120 million replacement for St. Joseph Hospital in Fort Wayne. Both of those are in rural or high need areas and aren't the specialized hospitals Ruckelshaus is worried are siphoning all the private pay customers.

In a recent article on this website, it was noted that on a recent long trip I could not help but notice all the new hospitals and healthcare-related buildings lining the interstate in every city along the route. History has proven that government spending can supplement the economy, however, over the long run government spending is a poor substitute for the free market in allocating capital to where it is most effective. Because hospitals and medical buildings are often difficult to "re-purpose" building when new capacity is really not needed results in turning "perfectly adequate" but not so new buildings into structures that have no future other than being be torn down, a wasteful act at best but hinging on something that could be considered morally criminal.