Senate Budget gives Certificate of Need the (Eventual) Ax | Eastern North Carolina Now

    Publisher's note: The author of this post is Dan Way, who is an associate editor for the Carolina Journal, John Hood Publisher.

Hospitals vow to fight rules blocking new medical investments without government approval

    One item in Senate's $22.9 billion spending plan isn't budgeted to cost the state a penny, with advocates arguing it will reduce government bureaucracy and improve access to medical services.

    Indeed, the former head of the state medical society has estimated that shift - the gradual repeal of certificate-of-need laws for medical providers - would save taxpayers $250 million annually in payments to the State Health Plan for public employees.

    But the state's powerful hospital lobby says it would be harmed by that change and has launched a campaign to keep it out of the final budget. Senate Bill 257, the budget bill, immediately exempts several medical services from CON laws. Those include ambulatory surgery centers, along with outpatient gastrointestinal endoscopies and some outpatient eye surgeries. The remaining CON requirements would be phased out fully by 2025.

    The idea behind CON laws is to ensure that the state offers the "right" number of medical providers - neither too many nor too few. Physician practices that want to purchase new high-end equipment or open standalone health-care facilities (such as outpatient surgery centers) must receive permission from state bureaucracies. Existing hospitals and other providers get ample opportunity and clout to oppose potential competition.

    Eliminating the CON provisions "will add financial instability to hospitals and health systems across our state already challenged by uncertainty in today's health-care environment," the North Carolina Hospital Association said Wednesday in a news release.

    But orthopedist Dr. Richard Bruch, former head of the N.C. Medical Society, has said the CON laws force members of North Carolina's financially embattled State Health Plan to pays a quarter-billion dollars more per year than necessary. In a medical journal article, he wrote that costs are higher for State Health Plan members because the lack of ambulatory surgery centers forces the plan to pay more than needed for routine operations in hospitals rather than outpatient facilities.

    Research also shows states with CON laws have higher death rates than those without them.

    The hospital association is the most vocal CON supporter. It recently formed a political organization whose mission, in part, is to raise money and back legislative candidates who favor maintaining CON laws.

    The association says repealing CON laws neither would reduce costs nor increase access to care. It cited research by Ascendient Healthcare Advisors claiming North Carolina's net price per inpatient discharge is 15 percent lower than the average of all states without the law, and provider cost per outpatient service is nearly 20 percent lower.

    The hospital association state North Carolina residents already have better access to health-care services than states without CON laws. North Carolina has nearly twice as many hospitals and 40 percent more Medicare-certified ambulatory surgery centers per 1,000 square miles.

    The hospital association argues in its release that 40 percent of the state's hospitals are in rural communities with high numbers of uninsured and underinsured patients. They depend on services such as outpatient surgery to offset losses in emergency departments and behavioral health care.

    Removing CON protection could put an estimated 2,300 rural jobs at risk in those communities, and reduce health care options, the release said.

    Critics of CON laws say the complaints from the hospital association don't track the experience of other states that have gotten rid of the restrictions.

    "We're not flying blind here. There are 15 states that have repealed CON," said Matt Mitchell, senior research fellow at the Mercatus Center at George Mason University. Results in those states can be used to test arguments against repealing certificate of need in North Carolina.

    While hospitals complain they do not operate in a free market, making it harder for new providers to enter the market is no answer, Mitchell said.

    "It's one of the most well accepted principles in economics that a supply restriction raises prices," he said, whether it's limiting a town to one pizza shop or one physician who can perform coronary bypass surgery. If regulations already limit the health-care market, adding other distortions such as CON laws worsen the problem.

    After reviewing four decades of research, Mitchell said he has found no evidence CON reduces spending. Nor does he believe it reduces prices per unit of service.

    And while hospitals consistently claim rural hospitals would be devastated by CON repeal, Mitchell said rural residents would gain by having ambulatory surgery centers nearby, more choices driven by competition, and greater access to care. They're being harmed now because CON restrictions force them to travel longer distances to get treatment.