January 26, 2021


North Carolina’s antiquated Certificate-of-Need (CON) laws should be repealed or reformed to meet our growing state’s need for more access to affordable, convenient care to treat both physical and mental health. A new study published Jan. 26 by the John Locke Foundation details academic research that illustrates the impact of CON and the benefits of mitigating its negative effects on care and costs.

Author and researcher James Bailey of Providence College writes in “Certificate of Need In North Carolina: Cost, Access, Treatment” that North Carolina has the strictest CON laws in the Southeast and the third strictest in the United States. The laws remains in place despite evidence that CON’s flawed premise – to control rising costs through government restrictions – was proven wrong. Fifteen states have repealed CON since the federal requirement was dropped in the 1980s.

In North Carolina, health providers must apply for and obtain a permission slip from the state – a certificate of need – before opening, expanding, or offering a new type of service. Bailey notes that the Institute of Justice (IJ) has found North Carolina imposes CON across six categories: hospital beds, beds outside hospitals, equipment, facilities, services and emergency medical transport.

To reach his conclusion, Bailey reviewed academic research on CON laws. He found they are associated with 30% fewer hospitals per capita, 13% fewer hospital beds, 14% longer emergency room wait times, and 3% higher spending. “Reforming or repealing CON is therefore likely to bring more health care facilities, lower health care prices, and better access to care in North Carolina,” he writes.

Bailey also conducted original research to calculate CON’s impact specifically on those who need mental health and substance abuse services.

By repealing North Carolina’s CON requirement for psychiatric hospitals, the state could expect to add three psychiatric hospitals, increasing capacity for care from 15 to 18. Bailey concludes that repealing this requirement would also benefit older North Carolinians, since 15 or 16 of the psychiatric hospitals would accept Medicare. Currently, only 12 of the 15 existing hospitals do so.

North Carolinians battling substance abuse would also have more options under a CON repeal initiative. Data from 2018 shows that 458 treatment facilities in North Carolina accept cash. Only 326 accept private insurance, and only 349 accept Medicaid. “Our estimates suggest that if CON were repealed, an additional six treatment facilities would accept private insurance and an additional 12 treatment facilities would accept Medicaid,” Bailey writes.

“The work of Dr. James Bailey provides academic rigor and evidence to show that CON laws limit the supply of health care and in turn drive up costs,” said Brian Balfour, John Locke Foundation Senior Vice President of Research. “For people who want to see greater access to care, in particular for mental health and substance abuse treatment, eliminating North Carolina’s CON laws would be a great start.”

Bailey will discuss his findings at Locke’s virtual Shaftesbury Society forum on Monday, Feb. 1 at Noon. The event will be livestreamed on Locke’s Facebook page and at johnlocke.org.

Read or Download the Study 


For More Information On This Study … 

Brian Balfour
Senior Vice President of Research

[email protected]

For media inquiries or to schedule an interview …

Mitch Kokai at [email protected], 919-828-3876 (office)
919-306-8736 (cell)