Little-known Minnesota law artificially restricts the supply of hospital beds

As COVID-19 infections sweep the nation, a Minnesota law restricting the number of hospital beds in the state isdrawing new scrutiny. Since 1984, the Hospital Construction Moratorium has put an artificial cap on hospital beds. The law prohibits the building of new hospitals as well as “any erection, building, alteration, reconstruction, modernization, improvement, extension, lease or other acquisition by or on behalf of a hospital that increases bed capacity of a hospital.” To add more beds, hospitals must jump through hoops to secure special approval from the Minnesota Department of Health and the Minnesota Legislature.

By April 18, Minnesota will likely be short 357 ICU beds due to a ramp up in COVID-19 infections, according to projections updated Monday by the Institute for Health Metrics and Evaluation at University of Washington. In the worst-case scenario projected by the group, Minnesota could be short 3,509 hospital beds and 986 ICU beds at the time of peak infection.

“It’s impossible to know if we would have been more prepared for coronavirus patients without the Hospital Construction Moratorium, but it certainly didn’t help. It’s time to get rid of this unnecessary and harmful law that artificially restricts our health care supply,” said John Phelan, an economist at Center of the American Experiment.

“It’s taken a global pandemic to realize that many state government regulations are artificial and created for the benefit of special interest groups, not consumers. States are starting to remove barriers to give people more freedom to trade and interact with one another. In Minnesota, the Hospital Construction Moratorium should be the first regulation kicked to the curb.”

Hospital Construction Moratorium facts:

• Between 1996 and 2016, Minnesota’s population increased by 810,000, but the number of state-licensed hospital beds fell by 921.
• In 2016, there were 16,262 hospital beds licensed in the state, but only 11,484 available, meaning 29% of licensed hospital beds did not actually exist.
• The law provides an incentive for hospitals to strategically “bank” bed licenses for possible future use, giving large hospital systems in metro areas a licensing advantage over smaller hospitals in rural areas.