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Federal Trade Commission staff has recommended that Alaska pass Senate Bill 1, which would repeal its certificate-of-need (CON) law. Alaska’s CON law requires healthcare providers to obtain state approval before expanding, establishing new facilities or services, or making certain large capital expenditures.

On March 27, 2019, FTC staff Daniel J. Gilman and David R. Schmidt testified before the Alaska Senate Committee on Health & Social Services at the request of Alaska State Senator David Wilson. Staff’s testimony reaffirmed prior testimony and a previous joint FTC and Department of Justice statement endorsing state legislation that would repeal Alaska’s CON laws.

Staff noted that “[a]fter considerable experience, it has become apparent that CON laws do not provide the benefits they originally promised. Worse, in operation, CON laws can undermine some of the very policy goals they were originally intended to advance.”

According to the testimony, CON laws create barriers to entry and expansion, limit consumer choice, and stifle innovation. Incumbent firms can use CON laws to thwart or delay otherwise beneficial market entry or expansion by new or existing competitors. Finally, as illustrated by the FTC’s experience in the Phoebe Putney case, CON laws can deny consumers the benefit of an effective remedy following the consummation of an anticompetitive merger, the testimony said.

“We respectfully suggest that the legislature consider whether Alaska’s citizens are well served by its CON laws and, if not, whether they would benefit from the repeal of those laws,” the testimony stated.

The Commission vote to issue the comment was 4-0-1, with Commissioner Rohit Chopra not participating. (FTC File No. V080007; the staff contact is Daniel J. Gilman, Office of Policy Planning, 202-326-3136.)

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