Bullying, scare tactics have no place in N.C. health care policy

We expect health care providers to focus on improving people’s lives. It’s bad news when government rules prompt those providers to shift their focus away from helping people.

It’s especially bad when government encourages health care providers to act more like bullies than healers. But that’s exactly what can happen with North Carolina’s certificate-of-need regime.

A recent court case highlights the problem. On July 6, a unanimous three-judge panel of the N.C. Court of Appeals agreed to grant a certificate of need to InSight Health Corp. The ruling affirmed earlier decisions from state regulators and an administrative law judge. In that sense, the ruling was unremarkable.

But details of the case, spelled out in Judge John Tyson’s 17-page opinion, highlight CON’s unsavory impact on N.C. health care.

The certificate of need is a government permission slip. Without it, health care providers are banned from opening new facilities, adding beds to existing hospitals, or even purchasing larger pieces of medical equipment. A government-appointed board working with state bureaucrats decides when and where to issue a CON.

One piece of equipment subject to a state CON is the positron emission tomography, or PET, scanner. It offers images that show how patients’ tissues and organs are functioning. In 2018 state government decreed that N.C. health consumers needed exactly one new mobile PET scanner across the state.

Without CON restrictions, health care providers would have been free to make their own decisions about adding new PET scanners. One or more providers might have put new scanners into operation in 2018, giving patients more options.

Instead the state forced interested providers to compete for a single CON. The certificate would grant the winner the exclusive right to purchase a new PET scanner. The winner would reap all financial benefits from additional scans.

Four applicants took time and spent money to follow the bureaucratic process. Once the state selected InSight as the winner in April 2019, a competitor lodged a formal complaint.

Now, three years after the state decided to offer a CON and two years after awarding it, there’s still no new PET scanner. All we have is a ruling from North Carolina’s second-highest court. It’s not even clear that the legal fight is over.

Bureaucratic and legal delays would be bad enough. But Tyson’s opinion highlighted evidence of behavior no one should expect from organizations devoted to boosting people’s health.

Mobile Imaging Partners, the challenger in the latest CON court fight, involves a partnership tied to UNC Health Care. It’s one of the state’s largest and most powerful health care systems.

One of Mobile Imaging’s legal objections was the fact that Insight had secured only one host site for its proposed mobile PET scanner. That could be a problem for a device designed to serve patients in multiple locations.

Left unstated in the complaint was the active role Mobile Imaging Partners had played in blocking InSight from securing potential host sites.

The court opinion noted Mobile Imaging’s “effective monopoly on mobile PET services,” along with its “history of opposing opportunities to allow additional providers to introduce services” in North Carolina.

Potential host sites had informed InSight that they “were wary of taking action to put their current service” with Mobile Imaging “at risk.” When InSight proposed a “statewide mobile PET route” with six sites, at least three potential hosts declined to participate. They would not write letters supporting InSight’s application “due to their concerns” about Mobile Imaging’s reaction.

It gets worse.

InSight was able to secure supporting documents from hospitals in Caldwell and Jackson counties. But Mobile Imaging later approached leaders of both hospitals. Mobile’s team had drafted letters that would rescind support for InSight’s application. One hospital official signed the letter, leaving InSight with a single hospital willing to go on record supporting its CON application.

Despite having signed the letter, the hospital president who went along with Mobile Imaging’s scheme later testified that she still would have considered working with InSight if it won the CON.

In other words, the only objection to InSight’s bid was active opposition from a competitor with an “effective monopoly” on existing services. Tyson noted “ample evidence” of Mobile Imaging’s “anti-competitive behavior.”

Nothing looks good about Mobile Imaging Partners’ actions in this case. Its behind-the-scenes maneuvers look especially bad when one considers the CON’s purported goal: increased access to health care. You’ll search in vain to find bullying and scare tactics among the skills taught to health care professionals.

While Mobile Imaging certainly deserves criticism for its actions, the case should prompt policymakers to ask deeper questions. Why should government decide how many mobile PET scanners operate in this state? Wouldn’t it make more sense to allow health care providers to respond to market demand? Wouldn’t North Carolina be better off today if one or more health care providers had purchased PET scanners in 2018 and started offering scans three years ago?

Perhaps most important: Why should North Carolina maintain a system that forces health care providers to wage continual bureaucratic and legal battles? A system that encourages them to waste time and money? A system that transforms some of its participants into bullies?

Mitch Kokai is senior political analyst for the John Locke Foundation.