News: CJ Exclusives

House members take another stab at certificate-of-need reform

A bipartisan group of House members hopes to break a regulatory chokehold on surgical facilities.

Reps. Billy Richardson, D-Cumberland; Ed Goodwin, R-Chowan; and David Rogers, R-Rutherford, on Tuesday, April 16, filed House Bill 857. The bill abolishes certificate-of-need laws preventing standalone ambulatory surgery centers from entering the medical market unless they get permission from state bureaucrats.

Critics say the CON laws are archaic, protect incumbent providers from competition, and drive up health care costs. Certificates of need — essentially government permission slips to provide certain services or buy equipment — require a lengthy, expensive bureaucratic process. Providers already operating these facilities have an outsized say in deciding if potential competitors get approved.

The N.C. Healthcare Association, representing hospitals and large health systems, has a different take.

“NCHA continues to support the CON law in its current form to protect access to care across the state, especially for rural and underserved populations,” spokeswoman Julie Henry said to Carolina Journal.

“Repealing the law, or adding an exception for specialty providers, will not create a free market in health care so long as specialty providers are not held to the same requirements as hospitals to care for all, regardless of ability to pay,” Henry said.

Richardson knows it’s an uphill climb to pass legislation reducing or eliminating CON regulations, particularly in the House, which has been more resistant to change than the Senate. But he’s not swayed.

“Just because legislation is difficult, and hard to get it done doesn’t mean it’s not needed,” Richardson said. “I think there’s nothing more powerful as an idea whose time has come.”

He thinks demand for surgical procedures has outgrown hospitals’ ability to respond, and legislation enabling more surgery centers would free up scarce bed space at hospitals.

“The medical needs in southeastern North Carolina are just overwhelming, and we need to make sure that people have access to affordable care,” Richardson said. Concentrating access in one or two industry groups has frustrated those attempts.

He thinks adding surgery centers will help patients in the way a new dental surgery center eased problems in Fayetteville. Dental patients needing surgery often got bumped from hospital schedules when surgical patients with higher priorities took that bed space. Once the dental surgery center opened, the problem resolved.

Richardson said H.B. 857 is a targeted, middle-ground compromise to prevailing legislative positions on CON reform — leave the system alone, which isn’t working; or repeal all CON laws, which hospitals and other powerful interest groups reject.

The Senate is considering Senate Bill 646, which also focuses on ambulatory surgery centers, and Senate Bill 539, which would repeal all CON laws.

Matthew Mitchell, a senior research fellow with the Mercatus Center at George Mason University, told CJ he sees rising interest nationally in CON reform.

“There seems to be a lot more activity on this issue in this legislative session than in legislative sessions past,” Mitchell said. Several states are considering either full or partial repeal of CON laws.

Hospital associations have blocked oppose with effective campaigns using apocalyptic and speculative warnings that hospitals will close, and quality and access to care will plummet, he said. But he said opponents argue that eliminating CON laws will reduce access to care when the primary function of CON laws is to limit the supply.

Recent research has challenged the hospitals’ claims, even showing CON laws are counterproductive, Mitchell said. With 38% of Americans living in states without CON laws, it’s possible to compare health outcomes among states based on their CON-based restrictions.

Mitchell said states can enact significant CON reforms without an outright repeal.

They could limit the range of procedures and technology purchases which require state approval. They could set high cost thresholds on equipment purchases subject to CON control, allowing more medical machinery (such as MRIs or other imaging devices) to be approved without a state permission slip.

Government bureaucracies with the authority to issue certificates of need also could be required to submit an annual report to the legislature. The report would offer transparency, showing how many applications were submitted and how many were granted, along with the percentage of applications that were rejected by providers merely protecting their turf.