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COLORADO SPRINGS, Colo.—The biannual gathering for Americans For Prosperity is celebrating a recent victory, a Florida law change loosening regulations on hospitals. It’s just one notch in a continuing quest for the policy advocacy group at the center of Charles Koch’s influential network.

Effective today, Florida’s hospital service providers are no longer bound by a Certificate of Need (CON) program, a regulatory process requiring some health-care providers to get state approval before they roll out new or expanded services. That’s thanks to legislation passed in April—the first time any state in the south has repealed such a law, according to AFP.

“People are now going to make market decisions,” Florida House Representative Chris Sprowls tells Barron’s at the Broadmoor resort in Colorado Springs, which hosts the summer gathering of about 450 philanthropic donors and business leaders in Koch’s Stand Together network.

“You’re not going to go spend $800 million on a mega-hospital if that’s not what the market calls for.”

That fits with the Koch ethos, which favors less regulation and freer markets and that sees “corporate welfare” as one big driver of the inequality now galvanizing U.S. political conversations. In AFP’s view, the focus of the past decade—how to subsidize expensive health care—should have focused on making care more affordable and accessible.

Florida’s shift illustrates the grass-roots efforts AFP says are most effective, as well as a shifting focus from Koch and AFP, which is emphasizing policy over politics. It’s one of 62 ”wins” for AFP in this legislative cycle, where in years past they might have had five or six, Tim Phillips, AFP’s president, told the crowd.

That was “only possible,” he said, “because you’ve, in a dedicated fashion, invested in Florida for the last 11 years.”

It’s not just Florida: in December, the U.S. Department of Health and Human Services called on states to repeal or scale back Certificate of Need laws.

The laws lacked “credible justification,” according to Emily Seidel, AFP’s chief executive, but they exist because of “to be blunt, entrenched special interests.”

The people on the boards that grant the certificates, she said, “often times [are] the applicant’s competition”—established businesses in health care with interests in restricting new entrants.

“Surprise, surprise, when they hold the rubber stamp, they don’t do a lot of stamping,” Seidel said.

Targeting CON laws may carry negative consequences for the profitability of hospital operators and service providers in states where the laws remain intact, including Kentucky and West Virginia.

In a 2018 paper, the Florida Hospital Association outlined its opposition to striking CON. “Removing Certificate of Need regulations will neither lower costs, nor improve quality. Instead, it will allow a proliferation of duplicative services to be offered in affluent communities, while lower income populations and the uninsured gradually lose access to vital hospital services.”

But CON rules reduce the number of hospitals in a given area by 30%, Seidel said, and let existing players to raise prices “much faster”—exacerbating two of the industry’s most commonly-cited problems.

“This is the definition of an economy that doesn’t work for all. It’s how people get left behind.”

Without CON, Floridians should see annual savings of $235 per capita on total health-care spending, according to a report from the Mercatus Center at George Mason University, which also forecasts that the number of hospitals in the state could surge to 352 from 248. (Charles Koch is a Mercatus board member.)

“New hospitals may be built more quickly without CON. It is unlikely they will be built in areas where there are high numbers of low income and uninsured Floridians,” Florida Hospital Association President Bruce Rueben said in a statement.

“CON was never a mechanism designed to lower health care costs. Payment reform is the only way to effectively drive higher quality and affordable cost. We look forward to working with others to achieve responsible payment reforms that improve access, reduce cost and promote quality hospital services in the state of Florida.”

This story has been updated to include a statement from the Florida Hospital Association and to clarify Charles Koch’s relationship with the Mercatus Center.

Write to Mary Childs at mary.childs@barrons.com