Introduction
Under North Carolina law, medical services providers must obtain a certificate of need (CON) from the state before they can open new facilities, expand existing facilities, install new or additional equipment, or even, in some instances, treat more patients. By design, the certification process favors existing providers and locks out potential competitors.
The CON law harms patients, insurers, and taxpayers by making medical services more expensive and less accessible and by reducing the quality of care. It also violates the North Carolina State Constitution. It should be repealed.
CON laws became popular in the 1960s. Policy experts supported them because they believed that Soviet-style central planning was the best way to organize critical industries, including health care. The big hospital chains supported them because they wanted to be protected from competitors that could offer better services at lower prices. By 1972, thanks in large part to effective lobbying by the American Hospital Association (AHA), CON laws had been enacted by 20 states.
North Carolina enacted its first CON law in 1971, but the North Carolina Supreme Court promptly struck it down. The court found that the law violated three provisions of Article I of the state constitution: Section 19, which forbids the state from depriving citizens of life, liberty, or property without due process; Section 32, which forbids the state from granting exclusive privileges and emoluments; and Section 34, which forbids the state from creating monopolies. That should have been the end of the matter, but it wasn’t.
With the active support of the AHA, in 1974, Congress approved a law under which only states with CON laws in place would be eligible for federal health care subsidies. The North Carolina General Assembly complied by enacting a second CON law in 1978.
It soon became clear that — contrary to what the planners and the lobbyists had claimed — central planning did not reduce the cost of medical care. Congress repealed the CON mandate in 1987, and since then 15 states have scrapped their CON programs. Unfortunately, North Carolina still has not done so.
Some minor CON rollbacks have been implemented over the years. A 2005 law allowed gastroenterologists to perform colonoscopies in their own endoscopy units. More recently, the state legislature allowed select rural hospitals to bypass the CON process when adding or converting unused acute-care beds into inpatient behavioral-health beds. Furthermore, as part of legislation passed in 2023 to expand Medicaid, some additional CON restrictions were rolled back: urban ambulatory surgical centers in counties with populations above 125,000, MRI scanners in urban counties, diagnostic equipment if the total investment is less than $3 million, psychiatric beds and chemical-dependency treatment beds, and licensed home-care agencies providing early and periodic screening, diagnosis,
and treatment services (EPSDT) to children up to 21 years of age.
Nevertheless, North Carolina continues to impose one of the most stringent CON programs in the country, regulating 25 services that range from kidney dialysis units to hospital beds and rural ambulatory surgical centers. This flies in the face of almost four decades of research showing consistently that CON laws make medical services not only more expensive and less accessible, but also of lower quality.
North Carolina’s CON law, moreover, has nothing to do with protecting public health and safety. There are other regulations designed to do that, and all medical service providers must conform to those regulations. The law serves only one purpose: to give large hospital chains a protected monopoly on a wide range of medical services. It should be repealed in its entirety.
Key Facts
- A survey of CON law research compiled by the John Locke Foundation showed that CON laws raise costs. The study found that, compared with states without them, states with CON laws experienced 13 percent higher health care spending by patients in poor health, 14 percent higher health care spending overall, and 60 percent more Medicaid spending per nursing home enrollee.
- The same survey showed that CON laws reduce accessibility. It found that CON law states have 30 percent fewer hospitals per capita, 26 percent fewer hospitals offering MRI scans and CT scans, 49 percent fewer neonatal intensive care beds, 14 percent fewer ambulatory surgery centers, 42 percent fewer substance abuse treatment centers, and 14 percent longer emergency department wait times.
- The study also found that CON law states experienced significantly higher death rates during Covid-19.
- According to the study, scrapping North Carolina’s CON law would result in the construction of more psychiatric hospitals and substance-abuse facilities.
- While supporters of CON laws claim they are necessary to ensure hospitals can provide “charity care” and accommodate those without insurance, multiple studies have found no difference in the amount of charity care between states that impose CON laws and states that do not.
- Supporters of CON laws also claim they are necessary to ensure access to health care for those who live in small towns and rural areas. Research shows, however, that states with CON laws actually have 30 percent fewer rural hospitals and 13 percent fewer rural ambulatory surgical centers than states without them.
Recommendations
1. Fully repeal North Carolina’s pernicious and unconstitutional Certificate of Need law.
North Carolina families deserve access to quality care and lower costs, unencumbered by government control.
