- North Carolina’s Certificate of Need law harms patients, insurers, and taxpayers by raising the cost of health care and reducing both accessibility and quality
- It also violates several provisions of the North Carolina State Constitution
- In a welcome development, bills to repeal the law in its entirety have been introduced in both houses of the General Assembly
The Certificate of Need Law harms patients, insurers, and taxpayers
North Carolina’s Certificate of Need law artificially restricts the supply of medical services in two ways. First, it requires service providers to obtain a certificate of need (CON) before opening new or expanded facilities, installing new or additional equipment, or even, in some instances, treating more patients. Second, it makes CONs almost impossible to obtain.
The CON law has nothing to do with protecting public health and safety. There are other regulations designed to do that, and all medical service providers must conform to those regulations. The law serves only one purpose: to give large hospital chains a protected monopoly on a wide range of medical services. As with any monopoly, the results include higher prices, poorer access, and a lower quality of care.
Regarding costs, a survey of recent CON law research compiled by the John Locke Foundation found that, compared with states without them, states with CON laws have:
- 13 percent higher health care spending by patients in poor health
- 14 percent higher health care spending overall
- 60 percent more Medicaid spending per nursing home enrollee
Regarding accessibility, the same survey found that CON law states have:
- 13 percent fewer hospital beds
- 26 percent fewer hospitals offering MRI scans and CT scans
- 30 percent fewer hospitals per capita
- 14 percent fewer ambulatory surgery centers
- 49 percent fewer neonatal intensive care beds
- 42 percent fewer substance abuse treatment centers
- 14 percent longer emergency department wait times
Regarding quality of care, the study found that CON law states have:
- 5 more deaths per 100,000 residents per year
- Significantly higher death rates during Covid
- Higher mortality rates for hospital patients admitted for pneumonia, heart failure, or heart attack
Despite such findings, supporters of CON laws claim they are necessary to ensure hospitals can provide “charity care” and accommodate those without insurance. However, studies have shown there is no difference in the amount of charity care between states that impose CON laws and states that do not.
The Certificate of Need Law violates the North Carolina State Constitution
When North Carolina enacted its first certificate of need law in 1971, the North Carolina Supreme Court promptly struck it down. In In re Certificate of Need for Aston Park Hospital, Inc., the court held that depriving a hospital of its right to construct and operate a new facility
is a deprivation of liberty … in violation of Article I, § 19 of the Constitution of North Carolina[,] … establishes a monopoly in the existing hospitals contrary to the provisions of Article I, § 34 of the Constitution[,] … and is a grant to them of exclusive privileges forbidden by Article I, § 32.
This was clearly the right result. Here are the relevant constitutional provisions:
- Art. I, Sec. 19: “No person shall be … deprived of life, liberty, or property, but by the law of the land.”
- Art. I, Sec. 32: “No person or set of persons is entitled to exclusive or separate emoluments or privileges ….”
- Art. I, Sec. 34: “[M]onopolies are contrary to the genius of a free state and shall not be allowed.”
In defiance of the Supreme Court’s holding, the General Assembly passed a new CON law in 1977. It attempted to immunize the new law against judicial review by appending a series of “legislative findings” purporting to show that the CON requirement saves money and promotes public health. Those findings were implausible at the time, and — as noted above — a large and growing body of research has thoroughly refuted them. Nevertheless, the North Carolina Court of Appeals has repeatedly found that the findings “cured” the previous law’s constitutional defects. Whether the Supreme Court will agree remains to be seen.
A New Bern eye surgeon named Jay Singleton has filed a lawsuit challenging the CON law under the three constitutional provisions discussed above. The John Locke Foundation has been supporting him at every stage in the proceedings, and we will continue to do so. It is a slow process, however, and the Supreme Court may not rule on his substantive claims for years. Indeed, it may never do so. Rather than wait and hope, therefore, the North Carolina General Assembly should take responsibility for solving the problem it created when it enacted the CON law.
Recently introduced bills give the General Assembly an opportunity to repeal the Certificate of Need Law
Several CON reform bills have been introduced in the North Carolina General Assembly this session. Senate Bill (SB) 316, SB 494, and House Bill (HB) 664 would limit the scope of the law by eliminating the CON requirement for some types of medical services. SB 370 and HB 455 would go further and repeal the CON law in its entirety, and so would a budget bill, SB 257, that was recently approved by the Senate.
Full repeal is clearly what North Carolinians need and deserve, but persuading a majority in both houses to vote for repeal won’t be easy. As with any government-protected monopoly, the CON law confers huge, concentrated benefits on a small group of people while imposing individually small but widely dispersed harms on everyone else. The former know what’s at stake and lobby vigorously to preserve their monopolies. The latter, for the most part, don’t even know that they are being harmed.
The sponsors of the CON law repeal bills and the senators who approved SB 257 have performed a public service. Let’s hope their colleagues do the right thing and get a CON law repeal bill onto the governor’s desk this session. It’s time to end this preposterous boondoggle once and for all.
For more information see:
Certificate of Need section from Locke’s “Policy Solutions” guide
Certificate of Need in North Carolina: Cost, access, treatment
North Carolina’s anti-monopoly clause: still relevant after all these years
