The health care CON in North Carolina

by Donald Bryson, Americans for Prosperity, published in News and Observer, March 6, 2015.

Good news: The number of students attending North Carolina’s medical schools reached a new high of 2,129 enrollees for the 2014-15 school year. Bad news: When these men and women become doctors, state government may prevent them from giving you the medical care you want or need.

That’s because of the state’s antiquated and overreaching “Certificate of Need” law. This little-known law has far-reaching effects on our state’s health care system – and not for the better.

Certificate of Need laws require health care providers to obtain permission – the “certificate” – from state government before adding equipment, expanding their facilities or opening a new practice. They were mandated as a national one-size-fits-all policy in the 1970s, only for the federal government to abandon them in the 1980s. But 35 states still have their own. North Carolina is the fourth most-stringent in the nation, requiring a certificate not just for new facilities but also for virtually any new piece of equipment – even another hospital bed.

Proponents of these laws say they keep costs low. But the opposite usually results: North Carolinians can expect to pay $1,000 a year more in health care costs than their counterparts in a CON-free state.

Health care needs constantly grow, but these certificates limit the supply of new providers and services, thereby keeping costs inflated. Independent facilities are able to offer procedures costing up to 60 percent less than their counterparts in hospitals –but they often can’t afford the time-consuming and costly process of obtaining CONs. One doctor in neighboring Virginia spent over $175,000 in legal fees – and five whole years – pursuing a certificate for a single medical device. More generally, our state has 12,900 fewer hospital beds thanks to our CON law, according to a new study by the Mercatus Center.

Thanks to our CON law, North Carolinians are losing out on access to newer and potentially more affordable medical care.

This also pits hospitals against smaller practices. “After all, what law better protects their fortresses from potential competitors who could possibly provide more innovative services in less expensive settings?” wrote Katherine Restrepo, a health care policy analyst at the Raleigh-based John Locke Foundation. One hospital CEO in Lenoir even admitted to The News & Observer that certificates protect a hospital’s income from competition. No wonder some experts call the Certificate of Need a “Certificate of Monopoly.”

Competition normally helps keep costs down and spurs innovation, but anticompetitive CON laws mean that health care in North Carolina is stagnating. Even the Justice Department and the Federal Trade Commission have called for the repeal of these laws, arguing they “undercut consumer choice, stifle innovation and weaken markets’ ability to contain health care costs.”

Just look at how our state’s CON law plays out in practice. In one recent decision approving the addition of an oncology device for one health care provider and denying it to another, the state board in Raleigh issued a 61-page ruling pitting the two facilities against each other in a “competitive review.” The board looked at factors like whether the facilities would use “improved energy efficiency and water conservation,” among other things.

This is the height of bureaucratic micromanagement. Entrepreneurs and patients, not bureaucrats, should be the ones making these decisions.

The statehouse took up a bill last year to reform the CON system, but it died in committee. It’s time for legislators to give it another go and introduce a bill to reform this onerous process. Phasing out these restrictions is a fix that would go a long way to improving healthcare – including making it more affordable and more accessible – for all North Carolinians. There shouldn’t be any red tape standing between you and the care you need.