News: Quick Takes

Watered-down Certificate-of-Need reform bill heads to House

By the time it made it through the Senate, the bill to reform Certificate-of-Need laws had lost most of its teeth. 

But unlike its previous incarnations, this push to loosen CON laws actually passed the Senate, 24-18, and heads to the House. 

For decades, the antitrust division of the federal government has denounced CON laws for being anti-competitive and for driving up the cost of health care. CON laws require providers to apply to the state for permission to build, buy new equipment, and expand their services. 

“CON laws create barriers to entry and expansion, limit consumer choice, and stifle innovation,” the Federal Trade Commission and the Antitrust Division of the Department of Justice reported. “Incumbent firms seeking to thwart or delay entry or expansion by new or existing competitors may use CON laws to achieve that end.”

The system allows incumbent providers to file challenges or comment on their competitors’ applications for CON approval. In effect, it allows bigger hospitals to quash any smaller competitors, says Jordan Roberts, John Locke Foundation health policy analyst.

“They file a challenge, it can cost hundreds of thousands of dollars, it jams up the process, and most of the little competitors can’t afford it. That’s how they slow down or end challengers,” Roberts said. “And if you get a certificate, you don’t even have to use it. You can just bleed competitors dry of money.”

When they first instituted CON laws in the 1970s, legislators hoped CON would lower costs by preventing unneeded health-care expenses. Reality has failed to deliver on those hopes. 

“CON laws are frequently costly barriers to entry for healthcare providers rather than successful tools for controlling costs or improving healthcare quality,” a Department of Health and Human Services report reads. “Available evidence suggests that CON laws have failed to produce cost savings, higher quality healthcare, or greater access to care, whether in underserved communities or in underserved areas.”

H.B. 126 would free psychiatric facilities, chemical dependency treatment facilities, and certain continuing care facilities, among others, from CON laws. The bill allows facilities to spend more on medical equipment and facilities before applying for permission. Under current law, facilities must get CON permission to spend more than $750,000 on a piece of equipment. Under this bill, they could spend up to $2 million before needing CON permission. 

“We all realize how broken CON is. We all need to be working on it,” Sen. Joyce Krawiec, R-Forsyth, said. 

The bill also sets expiration dates for CON permits.

“This is to stop hoarding, to stop people from getting CONs just to keep others out of the community by holding onto CON to protect the market. This will make sure that that doesn’t happen,” Krawiec said. 

Although senators have called this bill the “vanilla version” of CON reform, its sponsors call it better than nothing. Along the way, the bill shed controversial reforms, leaving intact CON laws on ambulatory surgery centers and kidney dialysis centers. 

“This bill started as a full repeal of CON, effective immediately. Now we’re talking about inflation adjustments and hoarding CON certificates,” Sen. Ralph Hise, R-Mitchell, said. “This bill has made four stops in health care alone. … I challenge anyone to find any bill this session that has had more committee hearings and had more changes made to it.”

North Carolina ranks as the state with the fourth most restrictive CON laws.