Case Nos. S17A1317 and S17X1318 IN THE SUPREME COURT OF GEORGIA __________________________________________________________________ WOMEN’S SURGICAL CENTER, LLC, et al., Petitioners and Cross-Appellees, v. CLYDE L. REESE, III, et al., Respondents and Cross-Appellants. _________________________________________________________________ Fulton County Superior Court, Case No. 2015-CV-262659 _________________________________________________________________ AMICUS CURIAE BRIEF OF SCHOLARS OF CERTIFICATE-OF-NEED LAWS IN SUPPORT OF PETITIONERS AND CROSS-APPELLEES WOMEN’S SURGICAL CENTER, LLC, ET AL. _________________________________________________________________ Yasha Heidari Heidari Power Law Group LLC 1072 W. Peachtree St #79217 Atlanta, GA 30357 Attorney for Amicus Curiae Scholars of Certificate-of-Need Laws Table of Contents INTERESTS OF AMICI CURIAE............................................................................4 INTRODUCTION AND SUMMARY OF THE ARGUMENT................................5 ARGUMENT.............................................................................................................7 I. A brief history of CON laws...........................................................................7 II. Certificates of need represent a grant of monopoly, and are associated with all the expected effects of a monopoly......................8 A. CON programs limit the introduction and expansion of a wide variety of medical services and equipment..............................11 B. CON programs are associated with fewer hospitals and ambulatory surgical centers................................................13 C. CON programs are associated with lower-quality healthcare..................16 D. CON programs increase healthcare costs.................................................19 III.There is no evidence that the costs of CON programs are outweighed by any benefits.....................................................21 CERTIFICATE OF SERVICE.................................................................................24 2 Table of Authorities Cases Exec. Town & County Servs., Inc. v. Young, 258 Ga. 860, 376 S.E.2d 190 (1989).....................................................................5-6 Darcy v. Allein (The Case of Monopolies) (1603), 77 Eng. Rep. 1260 (K.B.)..................................................................9, 22-23 F.T.C. v. Phoebe Putney Health System, Inc., 568 U.S. 216, 235 (2013)...................................................................................10–11 Georgia Franchise Practices Comm’n v. Massey-Ferguson, Inc., 244 Ga. 800, 262 S.E.2d 106 (1979)...................................................................9–10 Retail Services & Systems Inc. d/b/a Total Wine & More v. South Carolina Department of Revenue and ABC Stores of South Carolina, S. Car. Opinion No. 27709 (Mar. 29, 2017)............................................................10 Constitutions Ga. Const. art. III, § 6, ¶ V(c)(1).........................................................................5, 23 3 INTERESTS OF AMICI CURIAE Amici curiae are scholars of law, economics, and regulation, and have devoted significant academic attention to economic effects of regulation with a particular focus on certificate-of-need (CON) regulations. Amici thus have a strong interest in ensuring that this Court’s approach reflects an accurate understanding of the economic effects of CON programs. Amici teach that a public policy program should be measured by its effects rather than its intentions or justifications. A review of the relevant economic literature concerning CON programs demonstrates that these programs represent a grant of monopoly and have all the corresponding effects that result from such monopolies. In short, CON programs are associated with fewer options, higher costs, and an overall lower quality of care. The amici curiae are the following:1 Christopher Koopman is a Senior Research Fellow and the Director of the Technology Policy Program at the Mercatus Center at George Mason University, as well as an Adjunct Professor at the Antonin Scalia Law School of George Mason University and the George Mason University Department of Economics. Matthew Mitchell is a Senior Research Fellow and the Director of the Project for the Study of American Capitalism at the Mercatus Center at George 1 Institutional identifications are provided for informational purposes only. The views expressed in this brief are those of the amici curiae, and not necessarily their institutions. 4 Mason University, as well as an Adjunct Professor at the George Mason University Department of Economics. James Bailey is is an Assistant Professor of Economics at Providence College. Robert Graboyes is a Senior Research Fellow at the Mercatus Center at George Mason University, as well as an adjunct faculty member at the Department of Health Administration at Virginia Commonwealth University. INTRODUCTION AND SUMMARY OF THE ARGUMENT The Anti-Monopoly Clause of the Constitution of Georgia, GA. CONST. art. III, sec. VI, para. V, prohibits laws that have the effect of creating a monopoly. It states, The General Assembly shall not have the power to authorize any contract or agreement which may have the effect of or which is intended to have the effect of encouraging a monopoly, which is hereby declared to be unlawful and void. For some time, both economists and jurists have looked suspiciously on the intentional creation of monopolies by either private conduct or legislation. This sentiment is at the foundation of modern antitrust law.2 It is also at the heart of state policy against “defeating or lessening competition, or encouraging monopoly.” Exec. Town & County Servs. Inc. v. Young, 258 Ga. 860, 863, 376 S.E.2d 190, 192 2 Robert Bork, Legislative Intent and the Policy of the Sherman Act, 9 JOURNAL OF LAW & ECONOMICS 7 (1966). 5 (1989). CON laws represent the very type of legislatively created monopoly that courts have been concerned about for more than four centuries and that Georgia’s Anti-Monopoly Clause has sought to protect against. This concern is for good reason. This brief will begin with a brief overview of the history of CON. Thereafter, the empirical research presented in this brief demonstrates that CON programs (1) limit the introduction and expansion of a wide variety of medical services and equipment, (2) are associated with fewer hospitals and ambulatory surgical centers, (3) are associated with lower-quality healthcare, and (4) increase healthcare costs. Although there are claimed benefits of CON regulations, there is little evidence that these goals are achieved and strong evidence that the costs outweigh the benefits. 6 ARGUMENT I. A brief history of CON laws CON laws are a state invention. The first CON program was adopted by the state of New York in 1964 as a way to strengthen regional health planning programs by creating a process for prior approval of certain capital expenditures.3 Between 1964 and 1974, twenty-six other states adopted CON programs.4 However, with the passage of the National Health Planning and Resources Development Act of 1974, Congress made certain federal funds contingent on a state’s enactment of CON programs. This created a strong incentive for the remaining states to implement CON programs. Over the following seven years, nearly every state without a CON program took steps to adopt certificate-of-need statutes. It was during this time that Georgia passed its CON laws. In 1986—as evidence mounted that CON laws were failing to achieve their stated goals—Congress repealed the mandate. By 1988 eleven states had either repealed their CON programs or allowed them to expire, and other states had either raised their review thresholds or otherwise reduced the scope of their CON review. Today, fifteen states no longer have a CON program. 3 James Simpson, State Certificate-of-Need Programs: The Current Status, 75 AMERICAN JOURNAL OF PUBLIC HEALTH 1225 (1985). 4 Id. 7 II. Certificates of need represent a grant of monopoly, and are associated with all the expected effects of a monopoly Monopoly, in the most basic sense, can be defined as the absence of competition.5 This definition includes monopolies that arise naturally, those that arise through private action, and those that arise through state action. For more than four centuries, courts have viewed statutory grants of monopoly as unfavorably as monopolies achieved through private means. A definition of statutory monopolies, provided by Edward Coke, gives specific context for how far the understanding of monopoly has extended to include actions undertaken by fiat. Coke understood monopolies to include an institution, or allowance by the king by his grant, commission, or otherwise to any person or persons, bodies politique, or corporate, of or for the sole buying, selling, making, working, or using of any thing, whereby any person or persons, bodies politique, or corporate, are sought to be restrained of any freedome, or liberty that they had before, or hindred in their lawfull trade.6 There is good reason not to differentiate between monopolies created by state action and monopolies created by private action. In an economic sense, they are no different from one another.7 5 See, e.g., IRVING FISHER, ELEMENTARY PRINCIPLES OF ECONOMICS (1923). 6 EDWARD COKE, THE THIRD PART OF THE INSTITUTES OF THE LAWS OF ENGLAND 181 (London, W. Clarke and Sons 1644). 7 In fact, many economists view state-created monopolies more suspiciously than they do private monopolies.