A New Bern eye surgeon who is challenging North Carolina’s laws that cap the kinds of medical services, facilities and equipment that can be offered in geographic regions of the state will take his case back to court this week.
Jay Singleton, owner of Singleton Vision Center has been fighting for five and a half years to upend how health care industries have done business in this state for nearly half a century.
The ophthalmologist filed a lawsuit in April 2020; it argues that North Carolina’s Certificate of Need statute, or CON law, is unconstitutional.
The law requires nursing homes, surgical centers outside hospital settings, hospitals, ambulatory cancer care and cardiac amenities, substance use treatment beds, hospice and other facilities to obtain a certificate from the state Department of Health and Human Services before developing or offering the services.
Adopted in 1977 and amended over the years, the law was established as part of a national effort launched in the mid-20th century to contain health care costs by reducing over-investment in facilities and equipment. The theory at the time was that states would prevent unnecessary capital expenditures by requiring certificates of need for the development of things like medical services, hospital beds, imaging machines and other high-priced equipment.
Singleton contends that North Carolina’s law restricts his right to earn a living and to reap the full fruits of his labor. He also asserts that the CON system violates the anti-monopoly clause of the state constitution and grants special advantages to existing health care facilities without giving broad consideration to the public good.
Singleton Vision Center is “a full-service eye clinic” in New Bern. For years, according to Singleton’s lawsuit, he has wanted to perform surgeries for all his patients at the clinic, which he contends could save them “thousands of dollars over the cost of obtaining those procedures at nearby hospitals.”
The State Medical Facilities Plan, which is developed each year as part of the certificate of need process, found no such need existed in Singleton’s geographical region, which spans Craven, Jones and Pamlico counties. In fact, The Washington Post reported early this year that regulators haven’t seen a need for new surgical centers within an 1,800-square-mile area of New Bern since at least 2007. So Singleton had to perform most of his surgeries at the hospital that is just two miles from his clinic.
Singleton’s attorneys argued that had the ophthalmologist been permitted to run such a program, he would have been able to provide “high-quality outpatient eye surgeries consistent with the standard of care,” and provide it at a more affordable rate than the hospital.
Singleton’s case initially was dismissed in Wake County Superior Court on June 11, 2021, by Judge Michael O’Foghludha. On Oct. 18, 2024, the state Supreme Court issued an unsigned, unanimous four-page ruling that gave the case new life while leaving open the question of whether the certificate of need law is constitutional.
The case goes back to Superior Court, where a three-judge panel appointed by Chief Justice Paul Newby will weigh the legality of the CON law.
A con or boon?
Depending on whom you ask, you can get two widely diverging views on North Carolina’s Certificate of Need law.
Hospital industry advocates and state regulators say such laws prevent unnecessary duplication of facilities, equipment and services, which theoretically cuts down on wasteful spending and ensures more equitable access to care. They argue that is especially the case in rural areas, where sparse populations might not be as enticing to private market systems that are motivated by profit.
For instance, they say that facilities such as Singleton’s would more likely be built in urban areas where potential customers are likely to be wealthier than in rural areas — thus concentrating services there instead of spreading them across the state.
Critics call CON laws a “con,” using the play on words to describe the statutes as fundamentally anti-competitive. They say such statutes disincentivize existing providers from being efficient and controlling costs, arguing that free-market competition rather than government control will lead to lower patient prices, more choices and ultimately a higher quality of care.
A lower barrier to entry, critics contend, would encourage more providers to create facilities such as Singleton’s in more disparate places.
These opposing views are on display in Singleton’s case.
Organizations and individuals who aren’t part of the lawsuit are seeking to share their perspectives to help shape the outcome of the judges’ decisions.
Republican judges Jeffrey Foster of Pitt County and Troy Stafford of Iredell County are scheduled to hear arguments with Democratic Judge Jacqueline Grant of Buncombe County on Tuesday (Nov. 18) at a Campbell Law School courtroom in Raleigh.
North Carolina Treasurer Brad Briner and the State Employee Association of North Carolina are seeking to intervene in the lawsuit, siding with Singleton in his challenge of the CON law. They cite the North Carolina State Health Plan for Teachers and State Employees as their interest.
The plan provides health care for nearly 750,000 current and retired state workers and their dependents, making it one of the largest purchasers of health care in the state. For the fiscal year that ended on June 30, the plan’s expenditures totaled $4.5 billion, according to the brief filed by the treasurer and SEANC, a nonprofit organization with nearly 23,000 current state workers and another 19,000 retired employees as members.
“Although the CON law’s stated purpose is to lower healthcare costs while increasing access, the law’s actual purpose is to protect institutionalized and incumbent healthcare providers at the expense of would-be competitors, those who need healthcare, and taxpayers,” attorneys for the treasurer and SEANC wrote in the brief.
“[T]he CON law effectively prohibits new providers from entering the market, imposing a draconian burden,” the brief continues.
Varied pricing
The treasurer and SEANC offered examples of the difference in costs for services inside hospital settings versus freestanding centers. Their attorneys contend:
- An MRI performed for State Health Plan members at a standalone radiology center, on average, costs $872, while the same procedure at an outpatient hospital facility costs on average $1,252 — a 44 percent difference.
- A colonoscopy at a freestanding center costs on average $1,000. The same procedure at an outpatient hospital facility costs, on average, $3,500 — a 250 percent difference.
While the treasurer and SEANC acknowledge in their brief there could be other factors contributing to the pricing differences, they argue that they “exist in part due to the CON law.”
The John Locke Foundation, a right-leaning think tank that advocates for free market principles and has long been a critic of certificate of need laws, expressed similar views in its “friend-of-the-court” briefs supporting Singleton.
The state Department of Health and Human Services, its secretary, the governor and the leaders of both legislative chambers have asked the three-judge panel to dismiss Singleton’s case.
The federal government encouraged states to adopt certificate of need laws in the 1970s through the National Health Planning and Resources Development Act. The federal law suggested states create their own regulations and threw in a stick by adding that those that did not go along could lose federal funding for care. The worry was that without CON regulation, states would allow the proliferation of increasingly expensive and potentially unnecessary services.
Most states complied. Later, in the 1980s, the federal government rolled back its laws, and 12 states immediately followed suit.
North Carolina is one of at least 35 states that have CON laws in place, according to the state’s Oct. 15 motion to dismiss, but those regulations haven’t gone unchanged over the decades. Since North Carolina adopted the law in 1977, it’s been amended 50 times, the motion further states.
As recently as 2023, the General Assembly modified the law in conjunction with the expansion of Medicaid to at least 650,000 more people in the state. Those changes removed certificate of need requirements for ambulatory surgical centers in the 23 counties that had populations greater than 125,000 in the 2020 census. The modifications also eliminate CON review for MRI equipment in those counties and makes it easier to add beds in some psychiatric and chemical dependency facilities.
Thorny topic
The state’s certificate of need law has long been a source of debate in the General Assembly. The discussions have run the gamut of possibilities — from minor tweaks to full-fledged overhauls.
Powerful hospital advocacy groups typically are quick to mount strategic opposition when changes are proposed, often thwarting them. Federal law requires hospitals to treat patients with an emergency medical condition regardless of their ability to pay. Hospital leaders argue that because many of those patients have not had preventative care, they often have more severe and complex — and thereby expensive — medical needs. Hospitals have been able to offset the financial burden of that uncompensated care with commercially insured patients and specialty services that they contend would be eliminated by CON rollbacks.
They worry that ambulatory surgical centers would be in a position to cherry-pick patients, turning away those who cannot afford their services and pushing them to hospitals that are obligated to help them.
The Charlotte-Mecklenburg Hospital Authority, which does business as Atrium Health, the Cumberland County Hospital System (or Cape Fear Valley Health System), the North Carolina Healthcare Association, the North Carolina Health Care Facilities Association, the Association for Home & Hospice Care of North Carolina, the North Carolina Senior Living Association and Bio-Medical Applications of North Carolina filed a “friend of the court” brief together on Nov. 5 supporting the state’s stance on the Singleton case.
The CON law does not ban anything, the health care associations argue.
As part of the certificate of need process, the 25-member North Carolina State Health Coordinating Council — which includes licensed physicians, professors, elected officials and at least one member each from the state Senate and the House of Representatives — develops an annual State Medical Facilities Plan to guide strategies for the state’s health care facilities and services. That plan is developed with opportunities for public comment and input then forwarded to the governor for approval.
Using a series of criteria established through law, the state health and human services department then reviews applications for certificates of need and gives a thumbs-up or down that can then be appealed to the state Office of Administrative Hearings. Those decisions can be challenged at the state Court of Appeals.
Singleton’s case was different in that he did not apply for a certificate of need in the first place, because the State Medical Facilities Plan showed no need for a new surgical center in his geographical region for at least two years.
Sorting through research
North Carolina is not the only state seeing challenges to its certificate of need laws. Nebraska, Kentucky, West Virginia, Mississippi and Oregon have seen court or legislative action in the past few years seeking change.
Retired Duke University economist Chris Conover argued in a 2020 research paper that certificate of need laws cost the country hundreds of millions of dollars per year while also acknowledging that the dollar estimates were “quite uncertain given that the literature on how CON affects key outcomes such as mortality and spending is quite mixed.
“The literature provides mixed results, on average finding that CON increases health expenditures and overall elderly mortality while reducing heart surgery mortality,” wrote Conover and his co-author James Bailey, an economist at Providence College. “Our cost-effectiveness analysis estimates that the costs of CON laws somewhat exceed their benefits, although our estimates are quite uncertain.”
Although the decisions in Singleton’s case on his first go-’round in court focused mostly on his individual situation and narrowly tailored relief, the state Supreme Court ruling last year pushed questions of the constitutionality of the law into a broader realm.
In their request to dismiss the case, the state’s attorneys pointed out North Carolina Supreme Court decisions that have upheld the law. The partisan makeup of the top court has changed since then, however, moving from a 4-3 Democratic majority in 2022 to a 5-2 Republican majority in 2023.
The current state Supreme Court majority has reversed precedent set by previous benches, creating questions about the impact those dynamics will have on the North Carolina CON law.
“North Carolina’s certificate of need (CON) law bans healthcare providers from entering the market without a CON,” Singleton’s attorneys wrote in his Oct. 15 motion for the judges to rule in his favor even before a trial. “Unlike a professional or facility license, a CON does not regulate health or safety. Instead, whether a provider can obtain a CON turns entirely on whether a state agency projects a ‘need’ for more services — a decision that depends, at root, on whether there are already providers serving that region.
“Put differently: Whether a new provider can enter the market depends on whether old providers got there first.”
This article first appeared on North Carolina Health News and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.