News: CJ Exclusives

Certificate of need bill used for slice of mini-budget, but reforms not dead

Reforms to health-care regulations aren’t dead. 

Certificate of need reform was one of the bills sacrificed as scrap material for the piecemeal budget. As Republicans looked to push pieces of the budget past Democratic Gov. Roy Cooper’s veto, they stripped House Bill 126 and transformed it into a salary increase for the highway patrol. 

But senators say they still plan to push for reform this session, whether by adding the reform to another House bill or by including it in the special session on health care. 

Certificate of need laws require providers to get state permission whenever they want to build or expand their facilities. As one of the five most restrictive states, North Carolina also caps spending on medical equipment. 

Originally meant to dampen the rising costs of health care, CON laws aimed to prevent wasteful medical spending. But after herding the states into adopting CON legislation with a mandate, the federal government jettisoned CON requirements in the late 1980s, and eventually concluded that CON laws choked competition. 

As the decades passed, N.C. legislators left those caps mostly untouched, despite rising medical inflation. 

Critics say CON laws drive prices up by blocking competition, restricting supply, and forcing providers to sue if they fail to get CON approval. In one of the more recent cases, Raleigh Radiology and Duke Health have been fighting in court to win the CON for an MRI machine in Wake County. They’ve been embroiled in litigation since 2016.

“There is nothing we can do that will give better access to care in North Carolina [than CON reform],” said Sen. Joyce Krawiec, R-Forsyth. “I had a physician who told me yesterday that many of them are just at the mercy of hospitals, that they would love to have some freedom to start their own clinics and diagnostic centers. But with the CON regulations in place, it is just not possible.”

Provider groups protested that CON laws protect rural health care providers. They resisted lifting CON, especially in more contentious areas — namely ambulatory surgery centers and kidney dialysis centers. 

This session has been riddled with various attempts at CON reform, but most were either watered down or sunk in the House. H.B. 126 is just the latest casualty. 

“The House is just not as agreeable as we are in getting CON passed,” Krawiec said. “It seems like the one thing that never comes to fruition and never goes away, but we’re not going to let it go away. We’re going to keep working on it.”

As a bill that passed both the Senate and the House, H.B. 126 was eligible for a conference committee and impervious to amendments, making it ideal material for the piecemeal budget. 

Legislators are considering resurrecting the reform in a proposed special session on health care, though that session is tied to a budget veto override by the General Assembly. 

“It’s a barrier to competition, and those who are protected behind that barrier benefit from it. They tend to be more concentrated and politically organized group,” Matthew Mitchell, a senior research fellow at the Mercatus Center at George Mason University, said. “One significant problem is that the largest group of victims of CON — the consumers and patients — have no idea what it is or that exits, while those who benefit from it know very well.”

Despite years of failed reforms to CON laws, the regulation could wither under pressure from a new foe — telemedicine. 

“Often deregulation happens with technological change,” Mitchell said. “Telemedicine is increasingly making the geographic limitations on competition obsolete. People are getting around CON, whether the local monopolies like it or not. That’s what is going to make CON an obsolete policy.”