If legislators end up scrapping or reforming North Carolina’s antiquated and useless Certificate of Need (CON) law, it is understood that smaller community hospitals may have difficulty remaining viable if stand-alone outpatient surgery centers enter the market.

The House’s reform bill accomodates this situation by requiring newly constructed surgery centers to provide 7 percent charity care to support community hospitals in counties with populations of less than 100,000 people (which would apply to 3/4 of the state):

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Surgery centers could also only break ground if the community hospital agrees to do a joint venture. That’s a pretty nice deal for the hospital community considering outpatient surgery is vital to any  system’s bottom line.

Yes, repeal would be ideal. Market forces – not some bureaucrat – could then determine whether outpatient surgery facilitates can thrive in less populated areas. But overall, studies imply that lifted CON regulations on outpatient services has mainly prompted growth in highly populated areas. And it’s important to point out that there has been a reversing trend in which more stand-alone surgery centers are partnering up with hospitals due to widening reimbursement disparities under Medicare. Could the North Carolina Hospital Association be exaggerating a bit on amending CON?

Meanwhile, other states that have exempted outpatient surgery centers from state oversight have done the following to manage healthy competition within rural areas:

  • New Jersey: free standing ASCs are not subject to CON review on the condition that they contribute a tax of 3.5 percent of up to $200,000 on annual gross revenue. This revenue is then deposited in the state’s Health Care Subsidy Fund to offset community hospital uncompensated care.
  • Oklahoma operates on similar conditions, in which an ASC’s payer mix must be at least 30 percent Medicare and Medicaid. Failure to do so triggers a monetary penalty that benefits community hospitals.
  • Georgia: ASCs are required to report on the amount of charity care they provide.