Latest CON Court Ruling Exposes Underbelly of Outdated N.C. Health Regulation

A unanimous three-judge panel of the N.C. Court of Appeals has affirmed the state’s decision to award InSight Health Corp. a certificate of need for a mobile PET/CT scanner. It’s an unremarkable final decision.

But Judge John Tyson’s 17-page opinion highlights key problems created by the counterproductive CON process. Among those problems: Scare tactics worthy of the mob.

First, Tyson reminds us that health care providers must seek a government permission slip before they can purchase some types of medical equipment for use in North Carolina.

Rather than allow health care providers to make their own decisions about the best way to serve patients and customers, government bureaucrats at the N.C. Department of Health and Human Services engage in central health care planning.

State government dictated in 2018 that North Carolina would permit just one new mobile positron emission tomography, PET, scanner throughout the state. Four competitors submitted applications to win the government’s permission slip. It’s also called a certificate of need, or CON.

Without government involvement, any or all of the four providers could have purchased PET scanners in 2018 and started using them to serve patients across the state.

Instead government bureaucrats scoured the four CON applications and approved one in April 2019 for InSight. As is common in CON cases, a losing applicant launched a legal challenge of the state’s decision. That challenge has extended to July 2021, more than two years after the state’s initial decision and three years after the government decided North Carolina needed another mobile PET scanner.

The sore loser in the case, also known as the “Petitioner,” is called Mobile Imaging Partners of North Carolina. It’s a joint venture between Alliance HealthCare Services and University of North Carolina Rockingham Health Care, a “UNC-owned affiliated of the UNC Health Care System.”

Among Mobile Imaging Partners’ objections to the CON decision? InSight had only one confirmed host site for its PET scanner, even though the device was supposed to be mobile.

Both Petitioner’s and InSight’s applications included a letter of support from the Caldwell Memorial Hospital (“Caldwell”) signed by President/CEO Laura Easton. After applicants timely submitting their applications, Petitioner submitted written comments to DHHS within the form of another letter signed by Easton on 28 December 2018. This subsequent letter purportedly rescinded Caldwell’s previous letter of support for InSight and advised DHHS that Caldwell was now fully supporting Petitioner’s application. Without Easton’s letter of support for Caldwell to host, InSight had only one remaining host site, Harris Regional Hospital, in Jackson County.

Here’s where things get interesting. The court record suggests InSight secured support from only one host site because other potential hosts were scared of Mobile Imaging Partners.

InSight pointed to Petitioner’s effective monopoly on mobile PET services outside of Novant’s services and facilities. InSight also described Petitioner’s history of opposing opportunities to allow additional providers to introduce services to North Carolina’s health care market. InSight predicted new providers would find it difficult to obtain public support for their applications, based upon feedback it had received from potential host sites, who were wary of taking action to put their current service with Petitioner at risk.

InSight proposed a statewide mobile PET route with the scanner moving weekly between six potential host sites in eastern, central, and western North Carolina. At least three potential host sites told InSight they would not provide documentation to support its CON application due to their concerns about Petitioner’s reaction.

Petitioner undertook efforts to encourage InSight’s two host sites to rescind their support for InSight’s CON application. Petitioner prepared draft rescission letters for both of InSight’s host sites: Caldwell and Harris Regional. Caldwell’s president signed the letter. Harris’ did not.

Respondents set forth ample evidence before the DHHS and the [administrative law judge] showing any recission of support was the result of Petitioner’s anti-competitive behavior to ensure it was awarded the CON.

In fact, the Caldwell hospital president had not closed the door on working with InSight.

Caldwell’s president testified that if InSight had contacted her, she would have confirmed she would still consider contracting with InSight if it received the CON.

In other words, she signed the rescission letter only to avoid crossing the powerful Petitioner. If Tony Soprano were in the health care business, he would recognize these tactics immediately.

What conclusions should we draw from this latest court case?

First, Mobile Imaging Partners and its legal team will fight to keep an “effective monopoly on mobile PET services.” That fight includes using leverage to convince hospitals not to work with potential competitors. In the case of InSight’s PET scanner bid, the scare tactics worked relatively well.

Second, none of this would happen if North Carolina scrapped its CON law. InSight, Mobile Imaging Partners, and the two other groups that applied for a CON back in 2018 could have spent the past three years serving consumers. Rather than engaging in a lengthy court fight, and employing coercion to win the desired result, health care providers could focus on … wait for it … health care.

Need more evidence that CON wastes resources? Consider this additional excerpt from Tyson’s decision.

During the hearing, Martha Frisone, chief of the Health Care Planning and CON Section of DHHS, offered testimony. Her duties include directing and managing a team of twenty individuals in the implementation of North Carolina CON law.

A team of 20? Really? To tell health care providers where and when they can add beds, provide services, and purchase equipment? Surely that taxpayer-supported endeavor could be replaced by services that benefit patients and health care consumers directly.

CON is a bad idea. This latest court decision reminds us why North Carolina should scrap the law at the earliest available opportunity.