by Jon Guze
Senior Fellow, Legal Studies, John Locke Foundation
With the help of the Institute for Justice, a Winston-Salem physician has filed a lawsuit challenging North Carolina’s certificate of need laws. From IJ’s press release:
Imagine living in a neighborhood dominated by expensive restaurants with poor service and lackluster food. You see an opportunity and decide to open your own restaurant, but when you apply for your basic business license, a regulator says “there are already enough restaurants in your neighborhood and your competition might put them out of business,” and denies your application.
That’s precisely the predicament that Dr. Gajendra Singh finds himself in, except that instead of opening a restaurant, he’s opened a low-cost, transparently priced medical imaging center in Winston-Salem, North Carolina.
In 2017, Dr. Singh opened Forsyth Imaging Center to provide medical imaging services at a fraction of the prices charged by traditional providers, like hospitals. But Dr. Singh is prohibited from purchasing an MRI scanner—a key component of an imaging center—because the state’s outdated “certificate of need” law (CON) requires medical entrepreneurs to get the state’s permission to compete against existing providers. In Dr. Singh’s case, a board dominated by regulators and health care industry insiders has decided there is no “need” for a scanner that would compete with the nearby hospital, so he cannot even apply for the permit, let alone purchase one.
Dr. Singh thinks that competition is critical to maintaining quality, affordable health care, especially in an age of ever-increasing out-of-pocket deductibles. So he’s fighting back. Today he teamed up with the Institute for Justice (IJ) to file a lawsuit challenging the constitutionality of the state’s CON law. Thankfully, the North Carolina Constitution specifically outlaws state-enforced monopolies and demands that laws be applied even-handedly to protect citizens’ rights to earn an honest living.
“As a medical doctor, Dr. Singh took an oath to help people in need, yet the state is standing in his way to protect established medical providers from competition,” said Renée Flaherty, an attorney at IJ, which represents Dr. Singh. “That’s plainly unconstitutional. Dr. Singh knows first hand how hard it is for many of his patients to afford expensive medical services like MRIs and other scans. He’s made it his mission to provide affordable treatment with up-front prices. But North Carolina’s outdated CON law has made it an uphill battle for him to deliver on that promise.”
Dr. Singh, who is a practicing surgeon by trade, started Forsyth after listening to his patients complain about the hidden costs associated with medical scans. Medical costs, especially those that are paid out of pocket, are becoming increasingly opaque, which is particularly problematic for individuals on Affordable Care Act health insurance plans with high deductibles. In opening Forsyth, Dr. Singh wanted to simplify the process and offer affordable imaging services with no hidden costs. He advertises his prices online, which are as low as one-half or even a one-third the costs of the nearby hospital.
Since opening, Dr. Singh has purchased or leased a number of scanning devices such as X-ray and ultrasound machines, but because of the CON law, he cannot purchase an MRI scanner. Instead, he has to pay another provider to bring a costly mobile MRI to his office on a trailer for two days per week (the law requires that it be moved at least once per week). The mobile MRI is a costly loophole that allows Dr. Singh to provide a small number of patients the MRIs they need, but it only serves to drive up costs and drive down availability.
“Competition is the lifeblood of American entrepreneurship,” said Dr. Singh. “There is nothing special about the medical imaging field that should exempt it from basic economic principles like competition, and instead put in place a monopoly dominated by established medical providers.”
Dr. Singh is not alone in his frustration with the state’s certificate of need law. Across the country, medical innovators are forced to grapple with CON laws that were put in place in the mid-1970s. Since then, 14 states, including California and Texas, have eliminated their CON laws all together. North Carolina’s law is one of the worst in the country, regulating 25 different services.
“Health care costs are spiraling upwards, and CON laws are a big part of the problem,” said IJ Attorney Josh Windham. “By stifling competition and medical innovation, CON laws only serve to preserve existing providers’ monopolies and prevent startups from competing.”