An eye doctor’s legal battle could upend North Carolina’s health care industry
An eye doctor in New Bern could be on the cusp of changing the way decisions about health care access are made across the state.
Jay Singleton is challenging a decades-old law that lets state government officials carefully restrict which health care providers can build hospitals or offer certain services, plus whether they can buy new equipment and, if so, how much money they can spend.
The state says the law keeps health care costs down for patients. Singleton says it does the opposite. He could perform eye surgeries at his own office for significantly cheaper rates than what the local hospital charges, he claims, but because of this law, he isn’t allowed to even try to compete.
The end result is that no matter how hard Singleton works or how talented he is, his lawyer Joshua Windham told the N.C. Court of Appeals on Tuesday, there’s no legal way for him to attempt to offer his community more affordable care right now.
First the state would have to create an additional license — called a “certificate of need” or CON — in the New Bern area for the type of surgeries Singleton wants to perform, which Windham said won’t happen until 2025 at the earliest and isn’t guaranteed. Even if it does happen, Singleton and any other potential competitors would then likely have to pay expensive legal fees and endure a years-long fight over who should be allowed to do the work.
”This law isn’t doing anything to benefit the public today,” he said.
While Windham said that Singleton’s case is only about his individual situation, neither the state nor the health care industry seem to buy that.
A lawyer for the state said Tuesday that a ruling in Singleton’s favor could have the practical effect of invalidating the entire law. And the courtroom was packed to standing-room-only capacity with lawyers and other representatives for health care companies from around the state who came to watch.
Health care a free market?
States started passing CON laws in the 1960s, and in the 1980s Congress briefly made them mandatory nationwide, but a dozen states got rid of theirs since then, according to the National Conference of State Legislatures. There are now 35 states with CON laws. Some local legislators have tried unsuccessfully in recent years to repeal North Carolina’s law, too. Typically those legislative arguments are along the same free-market lines that Singleton is making in court.
Singleton’s lawyers are from a national group, the Institute for Justice, founded with financial backing from billionaire political activist Charles Koch to pursue free-market and other libertarian-leaning legal causes. Several professors from a different Koch-affiliated group, the Mercatus Center, filed a brief on Singleton’s behalf arguing that “CON programs are associated with fewer options, higher costs, and lower quality of care.”
On the other side are briefs from multiple large hospitals and other health care groups around North Carolina, arguing in favor of the law.
“Health care providers also routinely support the need for CON laws because the health care marketplace does not operate on free market principles and the health, welfare and safety of North Carolinians will be harmed without the CON Law,” says one brief signed by the influential N.C. Healthcare Association and others.
North Carolina’s law was passed in the 1970s with the goal of keeping health care costs down through “governmental restrictions on the unnecessary duplication of medical facilities,” says the N.C. Department of Health and Human Services, which is in charge of CON regulations. But Windham told the Court of Appeals that in reality the law gives large health care companies a way to shut down any potential competition that might force them to lower their prices.
For instance, he said, Carolina East in New Bern charges patients “more than three times” what Singleton would charge for eye surgeries if he could do the work at his own office. So he expects that the hospital will likely fight to prevent Singleton from winning any new certificates that open up, if the state even decides that the New Bern area could use more eye surgery options.
“He’d have to wait until 2025 — hypothetically, if there’s a ‘need’ in 2025 — and then fight with Carolina East for several more years, spending tens of thousands of dollars, fighting a billion-dollar hospital to break up its monopoly,” Windham said.
Should the courts decide on CON?
Nick Brod, a lawyer from Attorney General Josh Stein’s office who represented the state in Tuesday’s arguments, acknowledged that the CON process isn’t always perfect. But it’s a question of policy, he said, so any fixes need to be left to the legislature — not the courts.
“Health care is one of the most complex, heavily regulated and politically contested markets in our economy,” Brod said. “Everyone disagrees about health care.”
Judge John Tyson, one of the three judges hearing the case, at one point asked Brod to address Singleton’s argument about CON laws leading to a virtual monopoly in the New Bern area. Another of the judges, Toby Hampson, applied that same concern statewide.
“There are ways this law can be used — ways the need determinations can be abused or misused — essentially as kind of a front for a monopoly,” Hampson said.
Brod said there are numerous other concerns that go into the health care system, though, as state leaders must decide “how to best design a health care system that balances costs, quality and access, among many other factors.”
That’s a question the legislature has already been dealing with for more than 40 years, he said, and should have the power to keep dealing with. But a court ruling in favor of Singleton, he said, could have the affect of invalidating the entire CON law.
“I take the point that the law might not be perfect,” Brod said. “I think the changes to the law should come from the legislative process.”
What the legislature has done
The legislature passed some small reforms and updates to the law in August, increasing the dollar amounts that different medical costs have to exceed before CON regulations kick in. That has the effect of making the rules apply to fewer companies and decisions.
CON rules used to kick in for diagnostic centers — which can mean everything from labs to doctors’ offices — once the value of their equipment exceeded $500,000. The new law tripled that to $1.5 million. It also raised the definition of what counts as a “major” purchase of medical equipment from $750,000 to $2 million. And for construction and other capital projects, the new law doubled the threshold from $2 million to $4 million.
Those changes, sponsored by several top Republicans, passed nearly unanimously at the legislature in Senate Bill 462 and were signed into law by Democratic Gov. Roy Cooper.
But two other bills that included all those same provisions, plus some additional changes, went nowhere — despite backing by some of the GOP leaders who chair the House and Senate health committees. Those were Senate Bill 506 and House Bill 843.
Like those bills, a proposal to repeal the CON system, Senate Bill 309, was never allowed to even be heard in committee despite backing from multiple influential Republican legislators in both chambers of the General Assembly. Nor were other bills to exempt specific industries or types of equipment, like was unsuccessfully proposed in House Bill 750, House Bill 660 and Senate Bill 641.
CON fights in the Triangle
Hospitals sometimes use the CON process to try to stop competitors from edging onto their turf. Sometimes the potential competition comes from individuals like Singleton; other times it’s from other hospitals.
In September, the state approved UNC Health’s request to build a new $252 million hospital in Research Triangle Park. Both Duke Health and WakeMed tried to use the CON process to shut it down, The News & Observer reported. Duke argued its facilities already served Durham County well. WakeMed argued that UNC had “a surreptitious motive” to siphon away patients in the western Wake County suburbs, a wealthy and fast-growing area where WakeMed already has several facilities.
Similarly, last summer Duke won state approval to build a new hospital in northwest Cary, near the borders with Durham and Chatham counties. Both WakeMed and UNC attempted to use the CON process to stop it from being built, The N&O reported, claiming that Duke was infringing on their turf — in legal parlance, that it was “an unreasonable attempt to gain massive amounts of market share from other providers.”
And even for big corporations, the CON process can sometimes lead to lengthy delays. UNC Rex opened a new hospital in Holly Springs in late 2021 to much fanfare — nearly two decades after the state first put out the bid, in 2005. UNC Rex and Novant Health, a multistate hospital company based in Winston-Salem, fought over who would get to build the 50-bed hospital for years, with the certificate finally awarded to UNC Rex in 2014, The N&O reported.
This story was originally published March 24, 2022 at 8:00 AM with the headline "An eye doctor’s legal battle could upend North Carolina’s health care industry."
