As I write and you read, legislators have allegedly made final closed-door agreements on Certificate of Need (CON) reform — a law in which statists protect established health care facilities and hospitals from competition.
According to Dr. Bob Graboyes of the Mercatus Center, CON fits well with his "fortress vs. frontier" motto. My colleague John Hood refers to CON as not a certificate of need but rather a certificate of greed.
North Carolina has in some cases successfully moved the needle on CON in recent years. You can read more about that here. Other reforms made to the law, however, have their flaws.
One example is to a five-year pilot project beginning in 2010 in which the Division of Health Service Regulation (DHSR) issued a special ‘need determination’ for three single-specialty ambulatory surgery centers (ASCs) in the Charlotte, Triad, and Triangle regions. Despite ASCs having already proven to save Medicare an average annual $2.5 billion, operate efficiently, and receive high patient satisfaction scores since the mid 1980s, the state perceived this pilot project to be "innovative" in the year 2010. I’d like to think that this decision was a late wake-up call for North Carolina central planners that patients can access health care in lower cost settings, but I’m more inclined to conclude that the pilot was another delay tactic for future legislation granting ASCs full exemption from CON review. Regardless, innovative care delivery stalled since applicants were still thrown into the lagging approval process. It wasn’t until almost four years and roughly $345,000 in application and legal fees later that OrthoCarolina was able to break ground due to Carolinas HealthCare System and Charlotte Eye Ear Nose & Throat Associates (CEENTA) appealing its initial CON award.
Another example relates to language rolled into the 2013 budget exempting hospitals and other facilities such as nursing and adult care homes from state oversight when undergoing capital improvements or updating major medical equipment exceeding $2 million. The problem here is that these changes only benefit "existing facilities" — two words in the statutory text that distinguish the CON haves from the have-nots.
The "existing facilities" language causes all sorts of problems. A rural hospital that closed last year in Belhaven, North Carolina had plans to reopen, yet was still subject to market entry barriers because it was no longer actively operating. After obtaining the necessary funds to reopen a scaled-down hospital, the state still denied the application. Advocates of reopening argue that Belhaven is in serious need of an Emergency Department, as the nearest one is 35 miles away.
In response to this crisis, Belhaven mayor Adam O’Neal led a 130-mile walk from Beaufort County to Raleigh, where rural health care supporters held a rally outside of the General Assembly addressing how CON law hurts rural areas. The event prompted a bill to be introduced that would make it easier for hospitals that have recently closed to reopen without having to struggle through the CON process. It has already cleared the Senate and is supposed to be voted on in the House on Monday. If passed, SB 698 (formerly HB 20) would be considered a tiny carve-out from CON, but a huge win for the hospital advocates in Belhaven — especially in rural areas. Carolina Journal reports on the issue:
Connie Wilson, a lobbyist working for CON reform to allow orthopedic and ophthalmology ambulatory surgery centers to open, said H.B. 20 is a small bite of the apple.
"But it’s an important bite because for years the large hospitals have been hiding behind the skirts of the rural hospitals, saying, ‘You’re going to hurt the rural hospitals if you change CON.’ Now we have one example that shows where CON really does hurt rural hospitals, and we’ve been saying that for years," Wilson said.
Whether or not changes are made to the law this session or in the future, effective reform should entail passing legislation that lowers the drawbridge to allow the frontier to compete with the fortress, to allow innovation to disrupt the status quo. Effective reform ideally means full repeal.
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