North Carolina has the second most regulated Certificate of Need (CON) law in the nation, the impetus for the massive hospital monopolies we see in the state; and it’s hurting smaller healthcare providers and their patients. 

In October 2024, the North Carolina Supreme Court ruled unanimously to send a lawsuit challenging the state’s CON law back to a lower court. This ruling was the result of an original suit in 2020 by New Bern Ophthalmologist Dr. Jay Singleton, who claimed that the Certificate of Need (CON) law, which requires healthcare providers to get permission from the state before adding services or building new facilities, prevented him from adding an operating room space to his clinic, which would have greatly reduced the costs of patient procedures. Instead, Singleton is forced to perform surgeries at the nearby hospital which are three times the costs to patients and adds additional travel for his patients. He believes the enacted CON law violates Article 1, Sections 32 and 34, the emoluments and monopolies clauses, in the North Carolina State Constitution. The October ruling returns the case to trial court to determine if the state’s CON law violates the NC Constitution. 

 Locally, the NC Department of Health and Human Services (DHHS), under CON law, determined that the New Hanover County area only needed one cardiac catheterization facility. Novant and Wilmington Health had to compete for the CON. Of course, the much larger Novant was awarded the certificate because of its geographic access, scope of services, and higher number of Medicaid patients. Even though in their applications, Novant average net revenue per procedure would be $9,791 versus Wilmington Health, who would only make $3,215. This suggests that Wilmington Health may have been cheaper for patients. However, CON isn’t designed to award healthcare facilities CON based on costs to patients, but rather on the size of the facility. Under CON laws, the bigger guys always win, and Novant is a mammoth. 

 A 2022 study found that Novant Health had 96% of the market share in the Wilmington Metropolitan Area. This makes it impossible for private or physician-owned practices to compete. Novant and other major health systems like Atrium, UNC Health, and Duke Health refer to the huge amounts of Medicaid, Medicare, and uncompensated care incurred daily. Yet, in April 2024, Port City Daily reviewed Novant’s 2022 financial records and found they invested $525 million in revenues in the Caribbean and Central America. I’d say that the nonprofit giant isn’t doing bad at all. 

 North Carolina is one of 35 states with CON laws that control the planning and construction of new healthcare services and facilities. According to the North Carolina Healthcare Association (NCHA), the top advocacy group for hospitals, the goal of CON is to equitably distribute healthcare services across the state while ensuring quality services. This guarantees access to care for medically underserved populations and prevents oversupply that leads to increased costs to patients. The NCHA further argues that hospitals do not operate in a traditional free market environment. Hospitals have a moral and legal obligation to care for all patients regardless of their ability to pay. NCHA notes that payments for healthcare services vary widely based on services and payors. Hospitals rely on procedures like elective surgeries and high-end imaging to compensate for losses from acute care services. 

 Furthermore, according to the NCHA, repealing CON would clear the way for “niche healthcare businesses” that offer services with profitability as their top priority rather than community needs. They further state that “CON law amendments could threaten the survival of community hospitals if the regulations are not implemented carefully.” 

 There are four key issues with CON in North Carolina and why it’s harming, not helping, patients and providers: 

1. CON is determined by a 24-member State Health Coordinating Council (SHCC) with large oversight. The governor-appointed SHCC implements the State Medical Facilities Plan, which determines the need and number of all health services, health service facilities, inpatient beds, dialysis stations, operating rooms, and home health offices. Any proposal that does not fit into this plan is rejected. This presents a huge government-imposed market barrier. This unelected board has no legislative oversight and rulings are not subject to the Office of Administrative Hearings. Furthermore, the council members are not required to submit a conflict of interest statement or economic disclosures as other state boards are required to do. Many of these Board members are practicing physicians or have competing interests in other healthcare businesses. 
2. CON does not evenly spread out healthcare services. One of the top arguments is that CON protects health equity and the even distribution of healthcare services. North Carolinians know that healthcare access is anything but “equitable.” Since 2006, 12 NC rural hospitals have closed and more are at risk of closing. Rural community hospitals face several inevitable situations. First, smaller, independent hospitals close because they lack the negotiating power with suppliers and insurance payors. They also have high rates of uncompensated care without specialty care service lines or a better payor mix to offset the costs. The second situation is rural community hospitals are bought by larger health systems that consolidate services to streamline costs, allowing the rural hospitals to provide emergency and some acute care services while transferring patients to larger, urban facilities for specialized services or serious trauma. This allows larger health systems to enjoy market dominance in rural areas and control the number of licensed beds under CON. 
3. CON law does not lead to lower patient costs.  In theory, CON puts government-controlled monopolies in place on healthcare supply to lower patient costs, and medical providers use profits to recoup expenses from poor and uninsured patients while continuing to offer specialty services in underserved areas. However, there is very little data to back this up. Research has shown that CON has resulted in approximately 12,900 fewer beds, 49 fewer hospitals offering MRI services, and 67 fewer hospitals offering computed tomography (CT) scans, according to a report by the Mercatus Center. Rather than lowering costs, a review of CON programs found that patient costs increased by 5%. Without competitors, large providers can charge higher prices. 
4. Despite the costs of uncompensated care, hospitals still enjoy record-breaking profits. While hospitals continue to tout the high costs of uncompensated care, even during the pandemic the top hospital systems in the state made hefty profits, even as several systems are considered “non-profit.” The top seven health systems in NC- Duke Health, UNC Health, Novant Health, Atrium Health, WakeMed, Vidant Health, and Cone Health — reported $5.2 billion in net profits in 2021. Novant Health alone saw a profit of $382 million in 2020, despite reporting a decline in patient revenue. 

 Despite CON reforms last year through the passage of Medicaid expansion, CON needs to be fully repealed. The CON law has only made it easier for the state’s largest healthcare systems to play monopoly by buying distressed healthcare facilities and cornering the market in each county. This blatant monopoly has been called out by the Federal Trade Commission (FTC) who, back in January 2024, sued to block Novant’s acquisition of two hospitals citing that the sale would limit competition and increase consumer costs. 

 Free market competition drives innovation, lowers costs, and gives consumers the power to choose. It’s what makes our nation great. The healthcare industry is no exception. I’ve spoken with private practice providers who have told me their patient care costs are a fraction of larger systems because they can shop around for medical supplies and don’t have to negotiate with health insurers on what they charge for services. Many of these private practitioners charge on a sliding scale based on income. Yet because of CON, larger competitors are pushing smaller providers out of business or forcing them to sell their practices. 

Consumers and private practice providers must pressure NC’s legislators to repeal the CON law. Unfortunately, this will not be easy. The government regulations and those massive corporations enjoying the benefits of regulation do not want change. As economist F.A. Hayek noted in The Road to Serfdom, “Where the power which ought to check and control monopoly becomes interested in sheltering and defending its appointees, where for the government to remedy an abuse is to admit responsibility for it, and where criticism of the actions of monopoly means criticism of the government, there is little hope of monopoly becoming the servant of the community.”

Originally published in The Wilmington Conservative.