North Carolina has long been one of the nation’s leaders in providing medical care, and the Duke University Health System is seeking to expand the state’s reputation by building an $88 million cancer-treatment therapy center that would offer an innovative new treatment to the people of North Carolina and beyond.
However, before Duke — or any other hospital, for that matter — can begin building its facility, it needs to get permission from a state-run board under North Carolina’s certificate of need (CON) law.
North Carolina is one of 35 states that limit the ability of health care providers to expand their businesses through certificate of need, an obstructive and unnecessary approval process. CON laws were first passed in the 1960s by states seeking to slow increasing health care prices by limiting duplication and promoting health care consolidation. CON programs require health care providers to receive state approval, generally from the state’s health care agency or a designated CON commission, to add facilities or increase available services.
North Carolina requires a certificate of need for a wide range of expenditures, including construction and modification of health care facilities and the offering of new services. Providers must even get permission to add more inpatient care beds. Unlike other licensing laws, CON laws generally are not based on quantifiable criteria, such as experience or education.
Recent studies have shown CON laws fail to achieve many of their stated goals and actually increase costs for consumers by hindering competition and forcing providers to use older facilities and equipment.
A new state profile of North Carolina’s CON laws by the Mercatus Center at George Mason University examined the effect CON laws have had on the state’s health care industry and how the market would develop without CON laws. Mercatus notes that while states with CON programs regulate on average 14 different medical services, devices and procedures, North Carolina’s CON laws require medical providers to obtain government permission to compete for 25 medical services, one of the most burdensome CON laws in the country.
Using existing data on the cost of CON laws in other states, Mercatus estimates total health care spending in North Carolina could drop by $213 per person if the state’s CON law were to be repealed, and eliminating the certificate of need law would improve far more than just health care costs; it would also dramatically improve the quality and access of health care for North Carolinians. According to the Mercatus study, North Carolina could have 14 additional ambulatory surgery centers and 55 more hospitals in the state if they were to eliminate the CON law. Patients would also have access to more imaging tests outside of hospitals, which means fewer people would have to travel longer distances for care.
A study by Thomas Stratmann and David Wille of the Mercatus Center analyzed the effect of CON laws on specific metrics for nine different quality indicators at 921 hospitals. The study reviewed data from 2011 to 2015 and found the health care quality measures were significantly lower in CON states compared to states without CON laws — most likely because it’s harder to build newer, technologically advanced medical facilities in CON states compared to non-CON states. This issue isn’t merely academic; mortality rates linked to hospital complications were higher in CON states by about 5.5 percent compared to the average rate in non-CON states.
If North Carolina were to end its CON law, it would likely experience lower mortality rates from heart attacks, heart failure and pneumonia and reduced readmission rates for heart attack and heart failure patients. There would also likely be fewer deaths from post-surgery complications, according to Mercatus’ profile of North Carolina.
The data show CON laws don’t work, and the reason should be obvious: Doctors, hospitals and experts in the health care industry know far more about what services they need to provide medical care than a government-run health care board. And if providers are willing to invest tens of millions of their own money to add services or expand their facilities, why should bureaucrats stand in the way?
