by Jon Guze
Senior Fellow, Legal Studies, John Locke Foundation
North Carolina’s Certificate of Need statute intentionally restricts the supply of medical services. It forces medical service providers to obtain a certificate of need (CON) before opening new or expanded facilities, installing new or additional equipment, or even, in some instances, treating more patients, and it makes CONs almost impossible to obtain. It shields the large hospital chains that possess most of the existing CONs from competition and makes medical care more expensive and less accessible.
A lawsuit currently making its way through the courts illustrates why this pernicious and unconstitutional law should be overturned or repealed.
Factual and Procedural Background
Dr. Jay Singleton is a trained and licensed eye surgeon who has performed approximately 30,000 outpatient eye surgeries. His Vision Center in New Bern, N.C., is accredited by the American Association for Accreditation of Ambulatory Surgery Facilities. It meets all applicable licensing standards and follows State Medical Board guidelines, and its operating and recovery rooms are fully equipped.
Dr. Singleton has been performing outpatient eye surgery at the Vision Center safely for many years. When he performs such procedures at the Center the total cost is about $1,800. Dr. Singleton would like to offer all of his patients this safe, economical, and convenient option, but he can’t because the CON law strictly limits the number of surgeries he can perform at the center. As a result, he must treat most patients at a hospital that charges a “facility fee” of almost $6,000.
Why does the law force patients, insurers, and taxpayers to pay thousands more for every procedure? Not to protect public health and safety. If that were the object, the law wouldn’t allow Dr. Singleton to treat any patients at his Center. The law serves one purpose and one purpose only — to protect the large hospital chains from competition by low-cost providers like Dr. Singleton.
Rather than accept this state of affairs lying down, Dr. Singleton filed a lawsuit challenging the CON law on constitutional grounds, and the John Locke Foundation has been providing amicus support as his case makes its way through the courts. When the State of North Carolina filed a motion to dismiss the case, we filed a brief in opposition, and when the trial court granted the State’s motion, we filed a new brief urging the North Carolina Court of Appeals (COA) to reverse that decision and reinstate the case.
Convincing the COA to reverse the trial court’s decision won’t be easy. Courts dislike constitutional challenges and reject them when they can, often by invoking a doctrine called “judicial deference.” The doctrine was developed by progressive jurists in the early 20th century for the specific purpose of insulating economic regulations from constitutional challenge. As explained by one of its originators (Supreme Court Justice Oliver Wendell Holmes), the doctrine holds that even “injudicious” and “tyrannical” laws should be presumed to be constitutional unless they “infringe fundamental principles as they have been understood by the traditions of our people and our law.”
The COA applied the doctrine in 2010 when it rejected a previous CON law challenge in Hope—A Women’s Cancer Ctr., P.A. v. State. The cancer center wanted to expand its facility and treat more women, and it claimed the State’s refusal to allow such an expansion violated its right to due process under the North Carolina State Constitution. Rather than scrutinize that claim on its merits, the COA simply deferred to the General Assembly, which had appended so-called “legislative findings” to the law. The findings, which were presented without evidence, made the absurd claim that restricting the supply of medical services would somehow make those services cheaper and more accessible. The COA accepted the findings at face value and upheld the law.
At trial, the State argued that Dr. Singleton’s case was “similar to Hope” and should “likewise be dismissed,” and the trial court accepted that argument. In our brief, however, we note that Dr. Singleton’s case differs from Hope in important ways, and we argue that those differences justify a higher level of scrutiny than the highly deferential standard the COA applied in Hope.
We begin by noting that whereas Dr. Singleton claims the CON law violates three provisions of the North Carolina Constitution — the Anti-Monopoly clause, the Exclusive Emoluments clause, and the right to due process secured by the Law of the Land Clause — only the last of these claims was raised by the plaintiffs in Hope. That, we suggest, makes the COA’s holding in Hope irrelevant as far as the first two claims are concerned.
Moreover, we say, while the State might wish to argue that the legislative findings upon which the court relied to dismiss the plaintiff’s due process claim in Hope might also provide a basis for dismissing Dr. Singleton’s Anti-Monopoly and Exclusive Emoluments claims in the present case, that argument must fail because, as the State itself has acknowledged, such deference is only when “the right allegedly infringed upon is not a fundamental right.” Citing examples from North Carolina’s earliest days to the recent past — and paraphrasing Justice Holmes — we show that exclusive privileges like the ones conferred on the hospital cartel by the CON law clearly “infringe on fundamental principles as they have been understood by the traditions of North Carolina’s people and North Carolina’s law.” Dr. Singleton’s Anti-Monopoly and Exclusive Emoluments claims, therefore, should not have been summarily dismissed on the basis of the deferential standard applied in Hope. They should instead have been reviewed under a standard appropriate to principles “that North Carolinians have regarded as fundamental for more than 245 years” and that the North Carolina Constitution declares to be “great, general, and essential principles of liberty.”
We also provide an Appendix containing citations to and summaries of dozens of CON law studies that have become available since Hope was decided in 2010. After noting that those studies “thoroughly rebut the legislative findings appended to the CON law” and “show beyond a reasonable doubt that the CON law makes medical care more expensive and less accessible for North Carolinians,” puts “North Carolinians’ health in jeopardy,” and has “almost certainly cost many North Carolinians their lives,” we conclude:
Judicial deference does not mean abject, unquestioning servility. A pro forma listing of implausible legislative findings cannot permanently immunize legislation against judicial scrutiny, especially when, as in this case, fundamental constitutional rights and public health are at stake. As circumstances change, and as new factual evidence accumulates, the time must come when those changed circumstances and that new evidence become sufficient to overcome a presumption of constitutionality based solely on decades-old legislative findings. In the case of North Carolina’s Certificate of Need law, that time is now.
For the sake of North Carolinians’ health and economic well-being, let us hope the Court of Appeals agrees.
For more information, see:
Long May He Serve! (discussing Clarence Thomas’s critique of judicial deference)