Experts discuss N.C. Certificate of Need law, effects on health care

North Carolina’s Certificate of Need law is still being challenged by the lawsuit originally filed in 2020 by Jay Singleton, a New Bern ophthalmologist. The CON requires that the N.C. Department of Health and Human Services determines a need for a health service in an area before health care providers can apply to provide the service.

Singleton sued the NCDHHS because he wanted to perform outpatient eye surgeries at his clinic, but the department did not find a need for surgical facilities in his area.

The N.C. Supreme Court ruled in October of this year to have the case sent back to the trial court. There, the case will be tried as a facial constitutional challenge, meaning that the CON could be ruled unconstitutional in all applications. Singleton originally brought an applied constitutional challenge, meaning a ruling in his favor would overturn the CON only for his situation.

“What's significant about the Supreme Court case — which is now being sent back to the trial court — [is] if plaintiffs are successful, instead of just an incremental change and scaling back of the law, it would throw out the law altogether,” UNC Law Professor Richard Saver said. “That would be monumental.”

Saver said data on health care effects from CON law repeals in other states is subject to conflicting interpretations. He said areas with high competition between health care facilities will likely continue to experience competition if the CON is thrown out in North Carolina.

Without a CON law, the existing competition will hopefully drive down prices and make potential new providers think carefully about entering the market, while other communities with only one or two health care providers may be subject to increased competition, he said.

He said when one health system applies for a CON, the others will try to get the CON for themselves or say there is no need, which has arguably led to increased regulatory costs and delays.

“Certainly, we’ve seen some interesting battles in Orange County and the Triangle,” Saver said. “I like to joke with my students that if you think Duke-UNC basketball games are tough, you should see when the Duke Health System and UNC Health System battle over a certificate application.”

Saver said a repeal may be bad for rural communities because the CON incentivizes providers to open health care facilities in underserved areas.

UNC Law Professor Joan Krause said Orange County is a good example of how the CON can get complicated because it is a large county with its health care services concentrated in Chapel Hill.

“The example could be: Orange County has enough hospital beds, even though where you are, you're really far from anything else in Orange County, which is one of the reasons the Hillsborough facility makes sense,” she said. “But, if you said, ‘Well, Orange County has plenty of space, plenty of hospital services and medical services, you can all get into the university,’ that doesn't necessarily help people without transportation, way far on the edge of the county.”

The CON’s purpose is to ensure that North Carolina does not over-invest in health services, which can sometimes mean that health care access is limited under circumstances of rapid population or technological growth, UNC Health Policy and Management Professor Mark Holmes, said. In other states where CON laws have been relaxed, he said there’s been an immediate increase in available services.

Though there would likely be no major change in long-term care beds or nursing home facilities if the CON is repealed in North Carolina, he said there may be a rapid increase in the number of private offices offering imaging and other technology.

While Holmes said this might mean greater access to services, he also said private offices may overuse them, garnering profit to pay off the services or equipment. 

Community hospitals rely on having both profitable and unprofitable services, UNC Health Policy and Management Professor Karen Volmar said, and the CON would maintain a balance between the two.

“But if you let folks come in and build all of the most profitable things, that makes it more difficult, ultimately, for hospitals to balance their own books,” she said.

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