Louisville, Ky.—Dipendra Tiwari saw an urgent need for Nepali speakers to receive home health care from workers who understood their language and culture. With thousands of Nepali immigrants living in the Louisville area, he hoped to open a modest business that would employ nurses and health aides qualified to offer services to both the Nepali community and anyone else needing quality care in their home. But his dream was ended by a state law that says that there is no need for new home health agencies in most of Kentucky.

That law requires something called a certificate of need (CON), and it allows large health care companies to effectively monopolize home health services in the state. Dipendra’s application was formally opposed by the $2 billion Baptist Health conglomerate, which operates its own home health agency. Shocked and upset that the law would bar new home health entrants, Dipendra and his business partner, Kishor Sapkota, have teamed up with the Institute for Justice (IJ) to file a federal lawsuit against the state of Kentucky.

“Certificate of need laws unconstitutionally prevent new businesses from competing with established ones, while harming patients. Government shouldn’t be in the business of picking winners and losers,” said IJ attorney Jaimie Cavanaugh.

Dipendra Tiwari came to the United States in 2008, earned an MBA and became a certified public accountant. He owns and operates Grace CPA outside Louisville. Kishor Sapkota currently works in home health care and is married to a nurse. The two carefully followed the home health agency application procedures but were rejected in January of 2019 because Kentucky uses a crude formula to determine need for home health services county by county. In Jefferson County, which contains Louisville and its suburbs, the state has determined that there is no need, so no new home health agencies can serve patients.

Existing home health agencies, many of which are attached to large hospital companies, are more easily allowed to expand their services and ensure that the state’s calculations prevent new agencies from entering the market. Today, new agencies are allowed to open in just six of the state’s 120 counties.

“We simply want to start a home health agency that offers health care in the first language of thousands of Kentuckians,” said Dipendra. “Yet because of Kentucky’s certificate of need law, the big sharks can keep the small fish out of the market. When I opened my accounting firm, I didn’t need my competitor’s permission. Why should it be any different for home health care?”

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The federal government encouraged states to pass certificate of need laws in the 1970s as a move to control costs. However, after a decade of experience, it became apparent that the laws were not working as policymakers intended. The federal government reversed course. But with the encouragement of existing health care providers, many states kept their CON laws on the books. Currently, 17 states require a CON to open a home health agency.

Numerous studies have shown that CONs do not reduce health costs and may serve as a barrier to patients getting the care they need. In 2013, a national consulting firm hired by the state of Kentucky recommended “[s]uspending / discontinuing the CON program for home health agencies.” However, that recommendation was never acted upon by Kentucky legislators.

“Health care costs are rising,” said IJ attorney Andrew Ward. “The last thing the government should be doing is imposing fewer choices and higher prices.”

IJ first challenged a CON law in 2012 in Virginia. Currently, IJ is working with doctors in Iowa to challenge a CON for outpatient eye surgery centers and a doctor in North Carolina to challenge a CON on MRI services.