It’s pretty messed up what a North Carolina hospital has to go through just to be able to own an MRI machine.

That’s what we learned last week while sitting in a stuffy government building on the grounds of a former psychiatric hospital in Raleigh, listening to members of the State Health Coordinating Council (SHCC) hash out Certificate of Need (CON) rules.

Here’s how CON works. Let’s say a group of doctors or a hospital wants to add more hospital beds, construct a new facility, or even update major medical equipment like an MRI machine. They can’t just go ahead and make it happen. They first need to ask the state for a permission slip.

And that’s not all. Even if the state gives a stamp of approval, competitors can block the process by contesting approval and filing lawsuits that cost a lot of time and money. In the meantime, patients are left with fewer health care options.

On the agenda of the SHCC technology and equipment meeting was a petition submitted by Cape Fear Valley Health System (CFVHS), headquartered in Fayetteville, North Carolina. CFVHS made a request to change the law’s policy on how a “need” is determined for a community hospital looking to make the switch from leasing an MRI machine to buying one outright. Under current CON rules, a hospital that is leasing a mobile MRI unit can apply to buy its own MRI unit only if usage exceeds 1,716 scans, the minimum threshold for rural hospitals.

But — given rural locations and sometimes low MRI output — some may never reach that threshold, stunting their chance of ever owning a machine. The petition made a logical argument that community hospitals should be able to decide for themselves if acquiring a fixed MRI unit is more cost-effective than leasing. But even after hearing such logic, the council rejected the petition.


The committee majority reasoned that such a policy change would benefit very few hospitals. Based on historical data on MRI usage, they concluded with the assumption that only a handful would even apply for fixed MRI scanners in rural areas. The committee instead offered a less flexible option, one which upholds their central planning authority and ignores the sensibility of market forces. They tossed around the idea of lowering the minimum threshold of MRI scans that would trigger a need for a fixed MRI unit. Others pointed out that hospitals and other providers can take advantage of  “special needs determinations,” a saving grace which permits exceptions to the usual rules. In other words, if a community hospital doesn’t qualify to access new equipment — even with a readjusted threshold — it can seek an exemption.

This now brings us to the bigger problem. A problem that many central planners don’t understand.

The life of North Carolina’s CON law has been riddled with preferential treatment. This petition is exemplary of just that. Although CFVHS did not provide an in-depth financial analysis, it argued that owning an MRI scanner could be more cost-effective than leasing. That sensitivity to cost is in line with CON’s overall intent to slow the growth of health care expenditures. But the petition would have made fixed MRI acquisition exclusive to community hospitals.

Triangle Orthopedic Associates, a private medical practice, publicly commented that if CON law really wants to be consistent with its basic principle on cost containment, a uniform exception should apply to all health care settings that can house MRI units. Independent doctors’ offices receive 12 percent less in payment from Medicare for an MRI scan and upwards of 54 percent less from private insurance carriers compared to hospitals.

The bottom line is this. If health care providers have to constantly manipulate CON rules or take advantage of existing loopholes to access equipment they may need (and to keep others from acquiring), this only reinforces the many flaws of central planning.