(The Center Square) — North Carolina’s certificate of need law has resulted in nearly $1.5 billion in lost health care investments since 2012, according to a new report.
Americans for Prosperity Foundation highlighted the loss in a report released on Monday titled “Permission to Care: How North Carolina’s Certificate of Need Law Harms Patients and Stifles Health Care Innovation.”
Kevin Schmidt, AFPF’s director of investigations, and Thomas Kimbrell, AFPF legal analyst, found that while the total of certificate of need applications denied by the Department of Health and Human Services between 2012 and 2022 was almost $1.5 billion, the full cost is likely much more.
“Accounting for prohibitive application costs, competitor opposition, and industry gatekeeping, the true value of health care investment foreclosed over the last decade is assuredly much greater than the $1.5 billion in denied CON applications,” the authors wrote. “The result of so much lost health care investment is that North Carolinians pay higher prices for less access and lower quality health care.”
North Carolina’s CON law requires state permission for 23 separate types of medical care, from medical facilities and purchases of medical equipment, to the number of hospital beds and emergency medical transport. Reforming the law is at the center of negotiations between the legislative and executive branches on expanding Medicaid in the Tar Heel State.
The AFPF report highlights how the CON law creates “severe barriers to entry” for health care entrepreneurs by charging an average fee of $13,000 for each CON application, which does not include the cost of attorneys or consultants to help prepare applications.
North Carolina’s CON law also allows competitors to challenge the applications, and they often do. Since January 2020, “applicants appealed DHHS’ decisions on CON applications for nearly $1 billion in proposed capital expenditures,” according to the report.
“Approximately half of the appeals are from competition providers contesting CON approvals, tying up roughly $423 million in approved capital expenditures in litigation,” Schmidt and Kimbrell wrote.
The report also points to the incestuous relationship between the State Health Coordinating Council that oversees CON applications and the industry it regulates.
“AFPF’s analysis of current Council members found that at least 15 of the 25 current members are employed or affiliated with health care providers regulated by the Council,” according to the report. “The Council members act as gatekeepers protecting the incumbent care providers with which they are affiliated from competition.”
“North Carolina’s certificate of need laws and regulations empower these bureaucrats, rather than patient demand, to decide whether new health care services are needed,” the authors wrote.
The report highlights how Gov. Roy Cooper circumvented the CON law for emergency care during the pandemic, and changes to the law approved by the General Assembly last year, as well.
“These piecemeal changes highlight the inefficiencies inherent to North Carolina’s CON regime,” according to the report. “While these changes will allow patients and providers more health care access at the margins, the CON scheme still artificially limits the supply of health care to protect politically proficient providers from competition.”
The AFPF report comes as New Bern ophthalmologist Jay Singleton is asking the North Carolina Supreme Court to take up his constitutional challenge to the state’s CON law, which he claims violates the state constitution’s Article I.
A three-judge panel with the North Carolina Court of Appeals dismissed Singleton’s lawsuit in June because he had not pursued all available avenues for remedying his complaint before filing suit. Singleton argues that the CON law forces him to perform most surgeries at Carolina East Medical Center, rather than his own vision center, driving up the cost for his customers.
“All I want is a chance to compete so that I can offer my patients more affordable care,” he said in a press release this summer.
