State lawmakers are taking aim, once again, at a major regulatory pillar of health care competition in North Carolina: certificate-of-need rules.
The Senate Health Committee met Wednesday to debate Senate Bill 370, a wide-reaching bill to repeal the rules, which require state officials to analyze whether new equipment or facilities are needed in a given area before they’re approved.
The North Carolina Healthcare Association, a lobbying group for hospitals that strongly supports keeping certificate-of-need laws, wrote in its 2024 legislative brief that “the law ensures access to care for medically underserved populations and prevents oversupply that can lead to higher healthcare costs for patients.”
Opponents of the rules, however, say they stifle competition.
The Republican-controlled state legislature has chipped away at certificate-of-need laws in some minor ways in recent years, including some changes passed as part of the 2023 deal to authorize Medicaid expansion.
Broader efforts to repeal the law entirely, however, have been shot down in the face of intense lobbying by the hospital industry. Senate Republicans are hoping for a different outcome in 2025.
“The CON system we set up in the 1970s is failing and is no longer applicable,” Sen. Benton Sawrey, R-Johnston, said Tuesday.
Complicating matters this year is a development from outside the legislature: A unanimous ruling from the North Carolina Supreme Court to allow a lawsuit move forward that could end in certificate of need laws being ruled unconstitutional statewide.
Sen. Ralph Hise, R-Mitchell, said he expects the system to eventually be struck down in court but thinks the legislature should move to end the system more quickly. And Sen. Jim Burgin, R-Harnett, said he used to serve on a board that reviews certificate-of-need applications. He saw first-hand how hospitals would spend millions of dollars in legal fees to fight years-long battles trying to stop competition in their backyard. Getting rid of the rules will only lead to good outcomes for patients, Burgin said.
The hospital lobby took to social media Wednesday to criticize lawmakers for seeking to change the system. Repealing certificate-of-need rules, the Healthcare Association wrote, would “threaten to increase instability across the healthcare market sector during a time of great uncertainty due to proposed cuts by the federal government to essential healthcare programs.”
Several smaller groups within the broader health care agency sent representatives to Wednesday’s committee to speak on the bill; the hospice industry and a group for radiologists oppose the bill and want to keep CON in place. On the other side Americans For Prosperity, a conservative pro-business group, supports the repeal.
Most states, including North Carolina, use certificate-of-need laws to regulate the health care industry. If a hospital company wants to build a new hospital, it needs the state government to approve the plan. If a hospital or local doctor’s office wants to buy expensive new equipment, they need the state government to sign off.
The theory is that by forcing health care providers to prove that new services or tools are actually needed — hence the “need” in “certificate of need” — state regulators can stop unnecessary spending that would then be passed on to patients in the form of higher bills.
Some powerful lawmakers view certificate-of-need rules as antiquated or even un-American because, they contend, the rules stifle free-market competition and give the government too much power over the health care industry.
In response, hospital executives have heavily lobbied the legislature to keep those rules in place and not shake up their hold on an industry that a key lobbying group estimates as being worth $40 billion a year. When the state Department of Health and Human Services issues a certificate-of-need decision, it can be appealed.
Those appeals often lead to years-long legal battles, where multibillion-dollar hospital chains have an advantage over smaller firms or individual doctors, who don’t have the same sort of legal budget.
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