by Jon Sanders
Research Editor and Senior Fellow, Regulatory Studies, John Locke Foundation
Enacted in 1978, North Carolina’s Certificate of Need (CON) law was one of many state CON laws adopted to comply with the federal Health Planning Resources Development Act of 1974. CON laws use central planning to try to reduce health care costs by keeping health care facilities from buying too much equipment, building too much capacity, and adding too many beds. Four decades’ worth of data and research into CON laws have produced a recurring theme in the research literature: CON laws fail to lower health care costs; if anything, they raise them. In 1987 Congress repealed the mandate, and subsequently 14 states (but not North Carolina) ended their CON regimes. North Carolina hosts one of the most restrictive CON programs in the country, regulating 25 different services. While patients and rural communities are negatively impacted by CON restrictions (especially the poor, elderly, and those with emergencies), existing hospitals and medical service providers reap the benefits of CON laws insulating them from competition. Fewer than one-fourth (23 out of 100) of counties in North Carolina have more than one hospital. Seventeen counties still have no hospital. The cost in money and time just to apply to provide health care services in this state can be too great for smaller providers. Limiting beds, services, and competitors leads to higher profits for existing providers. At the end of 2012 a legislative committee recommended several reforms to CON, including allowing “market driven competition in the provision of health services.” Bills based on those recommendations failed in 2013. State leaders could honor the intent behind CON — preventing unnecessary increases in health care costs — by repealing CON.