North Carolina lawmakers are considering legislation to remove Certificate of Need (CON) requirements for health care services across the state.
North Carolina Senate Bill 370 and House Bill 455 would eliminate the certificate of need requirement for all health care facilities in the state.
This CON reform would greatly improve access to health care in North Carolina while putting beneficial pressures on costs and quality by encouraging greater investment in new facilities and improvements of existing ones.
CON laws are intended to reduce costs and improve access to health care by controlling the availability of medical facilities through state-based regulation. Unfortunately, CON laws decrease health care access, raise costs, lower quality, and stifle innovation by giving competing health care providers veto power over the construction or improvement of facilities or other capital improvements such as advanced imaging devices.
Hospitals across the United States are facing an upcoming shortage of facilities, a recent JAMA Network Open study found. Noting that “a national hospital occupancy of 85% constitutes a hospital bed shortage (a conservative estimate),” the researchers write, “our findings show that the US could reach this dangerous threshold as soon as 2032, with some states at much higher risk than others.”
Failure to replace closed facilities is the culprit, the study authors conclude: “This persistently elevated occupancy appears to be driven by a 16% reduction in the number of staffed US hospital beds rather than by a change in the number of hospitalizations.” This is a particular danger for states with growing populations, such as North Carolina.
“Our hospitals and health businesses are sophisticated enough to determine whether need exists to stand-up new outpatient facilities or purchase equipment,” Sen. Benton Sawrey (R-Johnston), one of two primary sponsors of the Senate bill, told The Carolina Journal. “The state does not need to play gatekeeper, which only adds costs that get passed onto the patient.”
Patients and the public health benefit when states reduce regulatory barriers to the construction of new health care facilities. Years of evidence clearly show the free market does a better job of controlling costs and at least as good a job at ensuring people have access to health care as CON laws do. “A review of 20 academic studies finds that CON laws have largely failed to achieve their stated goal of reining in healthcare costs,” Matthew Mitchell of the Mercatus Center wrote. “The overwhelming balance of evidence suggests that CON laws are associated with both higher per-unit costs and higher expenditures.”
As the research shows, CON laws do the opposite of what they are intended to do. In the 1960s, policymakers began to worry that the free market would concentrate lucrative medical services in some areas while creating an undersupply of services everywhere else. Beginning in 1964 with New York and extending to nearly every state throughout the 1980s, legislatures began to control the licensing of new facilities. In 1987, federal mandates requiring CON were removed. Since then, states have begun to reform and repeal their CON laws as many legislatures have determined that rationing health care in this way has done more harm than good.
Currently, 35 states and the District of Columbia require care providers to go through a CON approval process before constructing a facility or in some cases even buying certain equipment such as imaging machines. As of 2024, 12 states had completely repealed their CON laws.
The following documents provide additional information about Certificate of Need policies:
North Carolina House Bill 455, Senate Bill 370
This legislation would eliminate the certificate of need requirement for all North Carolina health care facilities.
Companion Bills to Repeal CON Laws Filed in House and Senate
North Carolina lawmakers have introduced legislation to eliminate the state’s Certificate of Need laws, The Carolina Journal reports.
Do Certificate of Need Laws Limit Spending?
Matthew Mitchel from the Mercatus Center examines the cost implications of certificate of need laws across the health care system.
Health Care Staffing Shortages and Potential National Hospital Bed Shortage
Researchers from UCLA and two California hospitals found that the United States will have a severe shortage of hospital beds by 2032. The hospital occupancy rate is 11 percentage points higher than it was before the pandemic, and “This persistently elevated occupancy appears to be driven by a 16% reduction in the number of staffed US hospital beds rather than by a change in the number of hospitalizations,” the researchers write. “These scenarios suggest that an increase in the staffed hospital bed supply by 10%, reduction in the hospitalization rate by 10%, or some combination of the two would offset the aging-associated increase in hospitalizations over the next decade.”
Certificate of Need (CON) State Laws
The National Conference of State Legislatures provides a state-by-state update on Certificate of Need laws with an interactive map.
CON Laws in 2020: About the Update
Matthew Mitchell and Anne Philpot of the Mercatus Center update the CON legislative landscape and provide context for state policy reforms.
Tearing Down Regulations That Restrict the Supply Of Health Care Has Become Bipartisan
Policy reporter Patrick Gleason examines the political currents and crosscurrents that have created rare bipartisanship in favor of CON repeal.
Certificate of Need Laws; A Systematic Review and Cost-Effectiveness Analysis
Christopher Conover and James Bailey from BCM Health Services provide an analysis of 90 studies of the effects of CON legislation in the states.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Health Care News website and The Heartland Institute’s website.
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S. T. Karnick
S. T. Karnick is a Senior Fellow at The Heartland Institute.
S. T. Karnick is a senior fellow and director of publications for The Heartland Institute.
