RALEIGH — A three-judge panel heard cases for and against the constitutionality of North Carolina’s Certificate of Need law on Tuesday, pulling the central health care regulation in the state into question. The judges gave no timeline for when to expect their decision.
The constitutionality challenge began with one doctor’s fight to perform surgeries at his ophthalmology practice in Craven County.
When New Bern ophthalmologist Jay Singleton wanted to dedicate a room to provide more complex, invasive procedures, the state told him it was illegal. Why? The North Carolina Department of Health and Human Services hadn’t identified a “need” for more operating room capacity in New Bern.
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In North Carolina, health care providers cannot expand services — be it new MRI machines, hospital beds, operating rooms — unless they are filling a pre-identified need. DHHS identifies these needs by looking at population numbers, demographics and utilization of various health care facilities, services and equipment to see what local area needs what. Health care providers then apply to meet those needs.
Carolina Public Press published a full explainer on the law last year.
Because of CON, Singleton was relegated to performing his surgeries at the local hospital, instead of expanding capacity at his clinic.
Singleton took DHHS to court over the law, arguing it stifles free-market competition. The case originally went all the way to the state Supreme Court. The Supreme Court decided Singleton’s case wasn’t just about his practice, but the constitutionality of the law on its face. They sent it back to the Wake County Superior Court three-judge panel that heard the case Tuesday to weigh the constitutionality questions.
Republican State Treasurer Brad Briner intervened in the case on behalf of Singleton, arguing that CON inflates health care prices. Briner believes those inflated prices are part of the reason the state health plan is so broke. The John Locke Foundation, a North Carolina-based conservative think tank, is also supporting Singleton.
Democratic Gov. Josh Stein, DHHS and the Republican leaders of both the state Senate and the state House have asked the three-judge panel to dismiss the case.
Republican Judge Jeffrey Foster of Pitt County, Republican Judge Troy Stafford of Iredell County and Democratic Judge Jacqueline Grant of Buncombe County made up the panel.
A little history
If the judges rule that CON law is unconstitutional, it wouldn’t be the first time. The North Carolina Supreme Court found the state’s original CON law unconstitutional in 1973.
In 1974, Congress adopted the National Health Resources and Development Act, which strongly incentivized states to have Certificate of Need laws. President Gerald Ford signed the measure into law the following year. While not an outright mandate, the measure encouraged most states to adopt these laws. Louisiana was the lone holdout.
North Carolina approved a new CON law in 1977, which has since been revised several times through subsequent legislation, but has not faced a serious court challenge — until now.
Arguments against constitutionality
Joshua Windham of the Institute for Justice, a nonprofit libertarian law firm based in Virginia, represented Singleton at the hearing.
Windham argued that CON law violates the North Carolina constitutional promise that each resident has the right to enjoy the fruits of their own labor. It also violates anti-monopoly and anti-exclusive privileges laws, Windham argued.
CON law tends to favor hospital systems that already have a strong foothold in the market, which is why Windham called the law a “monopolist’s dream” at the hearing. He said the law increases health care costs, reduces access to care and harms patients. The other side, though, believes that the law decreases costs and protects access to care. It’s fairly hard to prove either side right.
Windham also argued that the law stifles competition.
“How does limiting services ever lead to lower costs?” he asked the judges.
Arguments for constitutionality
The arguments in favor of the law revolved around the idea that CON isn’t truly inhibiting Singleton’s ability to practice medicine and earn a living. Lawyers also emphasized how CON supports the affordability and equitable geographic distribution of health care services.
Derek Hunter, the lawyer representing DHHS, argued that CON ensures that rural North Carolinians do not go underserved. If there is a need, there will be a service, in a perfect application of the law. Hospitals can’t just target metropolises and avoid rural communities, where high percentages of Medicare/Medicaid recipients result in lower margins for hospitals.
Plus, Hunter said, health care is not a normal marketplace that relies on supply and demand. Competition between providers won’t necessarily drive costs down, because of price transparency issues and so many health care decisions being made under duress.
But the hearing got stuck on one unusual argument from Hunter. He argued that due to a loophole in the law, Singleton could just do whatever surgeries he pleases in his procedure rooms. He doesn’t need an operating room to do an operation.
“Dr. Singleton is free to perform any surgery he wants,” Hunter said. Just in a procedure room, not an OR.
Windham accused Hunter of bringing this “bizarre” argument in “at the eleventh hour” to “muddy the waters” and “get the case off the docket.”
As a result of Tuesday’s hearing, the panel is expected to issue a decision on the constitutionality of the law. Whatever that decision is, it’s likely to be appealed.
This article first appeared on Carolina Public Press and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.