A Durham orthopedic surgeon argues that the State Health Plan for public employees wastes a quarter-billion dollars annually because North Carolina’s certificate-of-need laws force patients to use hospital-based facilities instead of physician-operated outpatient surgery clinics.

Dr. Richard Bruch, who is on the North Carolina Orthopaedic Association executive committee, issued that assessment in an invited commentary titled “A Sea Change in Medicine: Current Shifts in the Delivery and Payment of Medical Care” in the current issue of the North Carolina Medical Journal.

Bruch, a consultant for Triangle Orthopaedic Associates who also serves as board chairman of the North Carolina Specialty Hospital, wrote that the state’s CON law, which requires a state bureaucracy to approve the addition or expansion of new medical facilities, reduces the number of surgical procedures performed in outpatient clinics and shifts them to more expensive, hospital-based centers. According to the medical journal article, to reach the national average, 126,000 more patients would need to use in ambulatory surgery centers rather than hospital-based operating rooms.

Since the North Carolina State Health Plan pays on average $2,000 more for each surgery performed in a hospital outpatient department than it pays for surgery in an ambulatory surgery center, Bruch wrote, “this results in more than $250 million wasted annually on ambulatory surgery in North Carolina” that the State Health Plan could save if the state was at the national average for procedures in surgery centers.

“I don’t know that at face value I would disagree with that number,” state Sen. Ralph Hise, R-Mitchell, said of Bruch’s $250 million savings estimate. Hise is co-chairman of the Senate Appropriations on Health and Human Services subcommittee, and co-chairman of the Senate Health Care Committee.

Bruch’s commentary reinforces a point he made earlier this year in an interview with Carolina Journal and at a legislative hearing, when he said most surgical procedures are done in an outpatient setting. “More than 70 percent of North Carolina surgeries each year are ambulatory,” he said at the time.

Bruch said that in 2015 the federal Centers for Medicare and Medicaid Services “paid 40 percent less for the same surgery when performed in an ASC compared to a hospital setting.” He said the CON law, which limits the expansion of ambulatory surgery centers, is a “restraint of trade,” a complaint he repeated in his current commentary.

North Carolina certificate-of-need laws have been “subverted to protect incumbent CON certificate holders’ profits, not to serve the public with low-cost surgery,” Bruch told CJ. The present system insures profits for incumbent certificate holders, which are mostly hospitals, “at the expense of North Carolina patients, and employers, and government” in higher costs.

“Most analysts I know agree CON laws function to protect legacy hospitals and should be repealed,” said Devon Herrick, senior fellow at the Dallas-based National Center for Policy Analysis.

North Carolina orthopedists have proposed modifying CON laws without limiting ownership of new ambulatory surgery centers, Bruch told CJ in his earlier interview. “They could be owned by hospitals, by physicians, by corporations, or by any combination.”

Legislation authorizing that change failed to pass in this year’s legislative session. But some lawmakers said they will renew the push for CON reform in 2017.

“We’re talking about it,” said state Rep. Marilyn Avila, R-Wake, House chairwoman of the Appropriations on Health and Human Services subcommittee, and vice chairwoman of the House Health Committee. “The whole system is going to have to be rejiggered.”

Avila was one of the primary sponsors in the last session of House Bill 200, a measure seeking what she called “common sense, incremental steps” in exempting some of the 25 medical services and devices regulated by CON laws. The bill included ambulatory surgery facilities and diagnostic centers but did not pass.

“I’m not going to be very ambitious” in projecting major CON changes in the next session absent “a sweeping epiphany” occurring among some people, Avila said. “But I think we can make progress.”

Avila said she doesn’t want “to take a machete to a Gordian knot,” noting that most people don’t fully understand how interwoven all the CON components are, from physical structures to funding.

“That’s one of the reasons I’ve been so cautious in making changes” such as those proposed in Senate Bill 702, sponsored by Sen. Tom Apodaca, R-Henderson, Avila said. That bill called for complete repeal of the CON system.

In such a wholesale approach “you can do a lot of damage real quick” that can’t be fixed or repaired quickly if it doesn’t work out, Avila said.

But Hise, who co-sponsored S.B. 702 with Apodaca, said, “I fully intend to sponsor a bill again for the complete elimination of certificate of need.” Hise also authored, with Apodaca’s help, total CON repeal language that was inserted in a House-passed bill after the original House language naming the bobcat as the state cat was stripped out. That bill also failed to pass.

Hise envisions legislation including a deadline, probably 2021, after which all CON requirements would end. That would give hospitals a few years to adjust to some parts of CON repeal while imposing immediate eradication of others.

“I think long-term if even health care providers themselves are honest, and facilities are honest, that they recognize that CON is not going to be the future environment of health care,” Hise said.

“The determination of what type of facilities you have, what type of technology and equipment you have, is not going to continue to be able to be a state-based formulated system that literally takes years to change, or [fails to] adapt to technologies, or changes in prices, and environments, or populations,” Hise said.

He said he is “very confident” a complete CON repeal would pass in the Senate, and could pass in the House as well if committee chairmen allow it to go to the floor for a vote.