Politics & Government

Hospitals to fight bill that would open NC medical market

The main entrance to Carolinas Medical Center in Charlotte. The N.C. Hospital Association says that a legislative proposal to repeal the state’s certificate-of-need laws could hurt hospitals like CMC.
The main entrance to Carolinas Medical Center in Charlotte. The N.C. Hospital Association says that a legislative proposal to repeal the state’s certificate-of-need laws could hurt hospitals like CMC. rlahser@charlotteobserver.com

An influential state senator wants to repeal laws that were designed to curb health care costs, arguing that they have actually accomplished the opposite.

A bill introduced by Sen. Tom Apodaca, the Henderson County Republican who chairs the Senate Rules Committee, would eliminate the state’s certificate-of-need laws. Intended to prevent excessive facilities and equipment, the CON program requires hospitals and other medical providers to get state approval for expansions and major acquisitions.

But Apodaca contends that the program’s most vigorous supporters are the health care providers who are protected by them.

“If we opened it up and let providers compete, the consumers would come out better in the long run,” he said. “I think there would be more services available at less cost.”

Not everyone agrees.

While Apodaca’s bill has the backing of conservative political groups, it is opposed by the state’s powerful hospital association. Cody Hand, the association’s chief lobbyist, said fighting the bill will be a top priority.

Hospital officials say they depend on profitable services to offset losses from treating the poor and underinsured, such as those who can’t afford to pay for emergency room care. But repealing CON laws would let other providers eat in to the money-making parts of their operations. Financially struggling rural hospitals would be among those hardest hit, Hand predicts.

“Our concern is that rural hospitals that are barely able to make it as it is would have to make a decision about whether to continue,” he said.

Officials at Carolinas HealthCare System, the state’s largest hospital system, contended in a statement Wednesday that “the current CON law in North Carolina serves a vital role ensuring citizens of the state have access to essential services for which there is virtually no competition.”

A similar, but less sweeping bill has been introduced in the House. That bill, sponsored by Dan Bishop, R-Mecklenburg, and three other lawmakers, would exempt same-day surgery centers, psychiatric hospitals and some other medical facilities from certificate of need review.

The House legislation would make it easier for physicians to open same-day surgery centers – offices that typically charge far less than hospitals for outpatient procedures. Lawmakers pushed an almost identical proposal in 2013, but the proposal was tabled for further study. This year’s bill requires that surgery centers spend a portion of their revenue on charity care.

Connie Wilson, a lobbyist who has promoted the legislation on behalf of ophthalmologists and orthopedic surgeons, thinks the chances are better this time.

“There’s a good possibility that because of Sen. Apodaca’s bill, the issue has been pushed to the forefront,” said Wilson, a former state legislator.

A 2012 investigation by the Observer and The News & Observer of Raleigh found that hospitals and hospital-owned clinics tend to charge considerably more than independent doctor’s offices for many common drugs and procedures.

Fight for the Triangle

Certificate-of-need applications are bitterly contested in the Triangle, where rival health care companies compete for customers in one of the state’s most lucrative health care markets. It is not unheard of for several hospitals and outpatient centers in the region to oppose each other’s, with appeals that can drag on for several years.

Novant Health, a system based in Winston-Salem, won approval last year to close an operating room at the Franklin Medical Center in Louisburg and open an operating room at an outpatient surgery center in Youngsville, a few miles from the Wake County line. The company’s bid for a single operating room was fought by Granville Health System in Oxford, Rex Healthcare and WakeMed Health & Hospitals, both in Raleigh. The challengers accused Novant of overbuilding facilities, encroaching on Wake County and neglecting Youngsville.

When Rex was approved in 2012 to build a 50-bed hospital in Holly Springs in Wake County, the company had to fend off Novant and WakeMed in a protracted struggle. Novant, which had applied to the Holly Springs hospital in 2008 and 2011, finally gave up its fight in 2014, six years after the first application.

The N.C. Division of Health Service Regulation issued seven CON approvals and one denial just the first three months of 2015 in Wake, Durham and Johnston counties. The contested certificates were for dialysis stations, linear accelerators (radiation machines) and a CT stimulator for radiation therapy.

Dueling studies

Certificate-of-need laws are designed largely to curb rising health care costs by limiting the duplication of medical facilities, services and equipment.

Almost every state developed certificate-of-need rules following a 1974 federal law that made certain funding contingent on the enactment of such programs. But the federal mandate was repealed in 1987, and more than a dozen states subsequently discontinued their CON programs.

State and national studies have arrived at conflicting conclusions about the cost effectiveness of such programs.

Chrysler, Ford and General Motors studied a sampling of states and found that health care costs were significantly lower in the states with CON laws than those without.

But a 2004 report by the Federal Trade Commission and the U.S. Justice Department concluded that “on balance, CON programs are not successful in containing health care costs.”

What consequences?

Apodaca spoke of his mother-in-law’s efforts to get radiation treatment for breast cancer. There was only one radiologist in her Western North Carolina town who could provide the treatment, he said, so if she wanted an alternative, it would have required her to drive almost 30 miles.

But Adam Linker, co-director of the N.C. Justice Center’s Health Access Coalition, notes that CON laws provide some protections for the poor. When hospitals try to relocate from low-income communities to more affluent ones, for instance, the laws require hearings so that the public is given a say.

“I think there’s very broad recognition – even among people who don’t like CON laws – that repealing CON altogether would have a lot of unintended consequences we would not want to see,” Linker said.

Hand, the state hospital association lobbyist, contends that removing certificate-of-need laws will not create a fair and free healthcare marketplace. One example: Unlike same-day surgical centers, hospitals are required by federal law to treat and stabilize all who come to their emergency rooms, regardless of whether they have insurance or the ability to pay.

Repealing the laws also could lead to a shortage or physicians at rural hospitals, Hand contends.

The state’s top legislative leaders remain noncommittal about the proposals.

Alexander: 704-358-5060