by Jon Guze
Senior Fellow, Legal Studies, John Locke Foundation
Just before Thanksgiving, Wake County Superior Court Judge Gregory P. McGuire filed an order denying the state’s motion to dismiss in Singh v. DHHS, a case in which a Forsyth County surgeon named Gajendra Singh is challenging the constitutionality of North Carolina’s Certificate of Need (CON) law.
Because we’d been urging the General Assembly to repeal North Carolina’s CON law for many years without success, John Locke Foundation researchers were delighted when Dr. Singh filed his suit. Here’s what my colleague Jordan Roberts wrote about the case when it was filed last year:
Dr. Gajendra Singh is the founder of the Forsyth Imaging Center in Winston-Salem. Dr. Singh opened this facility in 2017 to offer patients medical imaging services at cheaper rates than those offered by other providers in the area. He was able to purchase most of the equipment needed to fully stock his imaging center, except an MRI machine, which is regulated under North Carolina’s CON laws.
North Carolina’s CON laws state that in order for a new facility to be built or changed substantially, the private individual must show a state planning board that there is a demand for this service in the service area. If the state does not believe that there is sufficient demand, the board will deny the request for a certificate of need. Dr. Singh was told by N.C. Department of Health and Human Services regulators that there are a sufficient number of MRI scanners in Forsyth County and that he was not permitted to purchase, install, and operate one there.
In a Legal Update that appeared shortly thereafter, I added details about the sections of the North Carolina Constitution that Dr. Singh claimed were violated by the CON law:
The complaint alleges two separate violations of Article I, Section 19, which states:
No person shall be … deprived of his life, liberty, or property but by the law of the land.
The North Carolina courts have consistently interpreted this clause to guarantee both the right to due process and the right to equal protection. According to the complaint, requiring Dr. Singh to obtain a certificate of need in order to purchase an MRI machine violates his right to due process because the requirement “lacks a real and substantial (or even a rational) relationship to protecting the health and safety of North Carolina patients,” and it violates his right to equal protection because “it draws an arbitrary and irrational distinction between providers who already own an MRI scanner … and providers who do not.”
The complaint also alleges a violation of Article I, Section 32, which states:
No person or set of persons is entitled to exclusive or separate emoluments or privileges from the community but in consideration of public services.
According to the complaint, North Carolina’s CON law violates this section because it “grants certain providers an exclusive privilege to provide MRI services in their areas” for no purpose other than “to protect incumbent MRI providers from competition.”
Finally, the complaint alleges a violation of Article I, Section 34, which states:
Perpetuities and monopolies are contrary to the genius of a free state and shall not be allowed.
The plaintiffs contend that by “conferring an exclusive privilege to provide MRI services in the service areas and flatly prohibiting other providers from doing so,” North Carolina’s CON law grants the former a monopoly in plain violation of Section 34.
I also noted that:
If Dr. Singh prevails, he will finally be able to realize his dream of providing low-cost imaging services in Forsyth County, but that’s not all. A win for Dr. Singh will open the door for other medical entrepreneurs throughout the state, thereby making health care cheaper and more accessible for all North Carolinians. It will also encourage challenges to other forms of cronyism, and, if those challenges are successful, many other types of goods and services will also become cheaper and more accessible.
There’s a lot at stake in this case. Those who benefit from cronyism will be hoping and praying that Dr. Singh loses. That means the rest of us need to hope and pray that he wins!
In the end, we decided to do more than hope and pray. We asked the court to allows us to intervene on Dr. Singh’s behalf. After our request was granted, we filed an amicus curiae (“friend of the court”) brief in opposition to the state’s motion to dismiss. The brief, which is available on our website, begins by noting:
The John Locke Foundation has opposed North Carolina’s Certificate of Need (CON) law for many years, not only because it is unconstitutional and violates the rights of North Carolinians, but also because it directly harms patients and taxpayers by making health care more expensive and less accessible. We therefore have an interest in presenting to this court the best and latest research pertaining to the questions presented in this case, including whether the CON law serves the public interest, whether it is rationally related to a legitimate legislative purpose, and whether the exclusive privilege it grants to a small number of medical service providers violates the North Carolina Constitution. The research we will present concerns, among other things, the origin, meaning, and application of the Constitution’s Anti-Monopoly Clause, and the deleterious effect of CON laws on the economy and on public health.
The brief goes on to refute the arguments in the state’s motion point by point, and it also provides an annotated list of 23 scholarly studies conducted since 2010, all of which found that CON laws make medical care more expensive and less accessible.
We weren’t the only intervenors in the case. Several associations representing hospitals and other large service providers who benefit from the CON law intervened on behalf of the state. And, in addition to us, a group of nationally recognized health care scholars, a coalition of patients and providers, and the Goldwater Institute all filed amicus briefs in support of Dr. Singh.
Generally speaking, courts are only too happy to dismiss constitutional challenges to state regulations. But with all of this support for Dr. Singh coming on top of the excellent written and oral arguments presented by his attorneys from the Institute for Justice, Judge McGuire decided to let this one go forward.
It’s just the first round in what’s likely to be a long fight. Nevertheless, it’s good news, and I gave thanks for it last week.