This little-known law is the reason NC Medicaid expansion hasn’t passed
Medicaid expansion was an unrealistic proposition for the better part of a decade as North Carolina’s Republican-controlled legislature bristled at its Obama-era origins.
That changed in 2022. During the General Assembly’s last legislative session, both Democrats and Republicans heralded the health care plan’s expansion as a boon for North Carolina’s lower-income residents.
Despite apparent accord, though, Medicaid expansion still hasn’t passed into law. More than 500,000 uninsured North Carolinians stand to benefit should new Medicaid criteria roll out. So what’s the hangup?
An obscure “certificate of need” law.
What’s the law?
North Carolina’s certificate of need law authorizes the state Department of Health and Human Services to oversee spending on hospital expansions, new health care facilities, medical equipment purchases and more.
The DHHS website explains: “The North Carolina Certificate of Need (CON) law prohibits health care providers from acquiring, replacing, or adding to their facilities and equipment, except in specified circumstances, without the prior approval of the Department of Health and Human Services. Prior approval is also required for the initiation of certain medical services.”
The oversight is meant to prevent unnecessary duplication of services that might drive up health care costs and make sure that services are distributed in an equitable way, not just concentrated in the communities that can afford high-priced services. But some smaller health providers say the regulations exclude them or force them to wage long, expensive legal fights, allowing wealthy companies to maintain monopolies.
To whom does the CON law apply?
Almost any medical facility you can think of must navigate the CON process before construction.
“No person shall offer or develop a new institutional health service without first obtaining a certificate of need,” the law says.
That includes hospitals, psychiatric facilities, nursing homes, diagnostic centers and more.
Under most circumstances, established institutions must apply for certificates of need when expanding services or adding equipment. Even relocating patient beds from one campus to another first requires a CON.
What is the application process like?
Within DHHS, a subsection called Healthcare Planning and Certificate of Need accepts CON applications and conducts a review process, in which anyone may submit written comments. Should comments compel a public hearing, HPCON will host one.
The agency is required to make a decision no later than 150 days from the first day of review. Certificates of need are issued 30 days after approval, barring legal objections.
Certificates of need are sometimes challenged by competing institutions. In such cases, the legal process can take years to resolve.
Does every state do this?
No, but many do.
North Carolina is one of 35 states with CON laws, according to 2021 data from the National Conference of State Legislatures.
Congress conceived of the modern CON concept in the 1970s, a few years after North Carolina abandoned an earlier iteration. The federal government funded CON law development and required states to follow its model before repealing the mandate in 1987.
Only 12 states have completely deserted the premise behind certificates of need. Arizona, Minnesota and Wisconsin operate similar programs under different names.
What does this have to do with Medicaid?
North Carolina’s CON law doesn’t have a direct bearing on the state’s capacity to expand Medicaid. But some legislators insist a Medicaid expansion bill include CON reform.
In a written statement to The News & Observer, North Carolina Senate leader Phil Berger, a Republican from Eden, said certificates of need work against the ideals outlined in North Carolina law.
“North Carolina’s Certificate of Need regulations increase costs and artificially reduce the availability of healthcare,” he said. “As a result, we rank 49th in the nation in cost and 43rd in access. We need to adopt policies that will foster the construction and opening of more facilities in our communities so patients in North Carolina can access care at competitive rates.”
Others wish to maintain the status quo. The North Carolina Healthcare Association, a powerful interest group that represents hospitals and endorses the current CON law, warned in September that reform could undermine equal access to care.
“CON law changes could threaten the survival of community hospitals if they are not implemented carefully,” NCHA Board Chair Dr. Roxie Wells, president of Cape Fear Valley Health Hoke Hospital, said in a release.
She said that CON changes could cost hospitals hundreds of millions of dollars that might be passed along to patients. By limiting how many providers can offer lucrative services, the CON law helps hospitals ensure they can offset operational losses for things such as Medicaid care, the NCHA says.
Still, the NCHA offered a compromise earlier this month “(i)n an effort to get stalled negotiations moving.” It proposed concessions on ambulatory surgical centers and inpatient beds for patients with psychiatric problems and chemical dependency.
Talking to reporters in August, North Carolina House Speaker Tim Moore, a Republican from Kings Mountain, said CON reform should be distinct from Medicaid expansion.
“I mean, let’s think about this. It’s not the expansion piece that’s in controversy, right?” he said. “It’s CON and the scope of practice provisions. So it depends, if folks are really serious about wanting to fix expansion, we can take care of expansion, and deal with all that other stuff at a later date.”
Until the Senate and House agree to a compromise, Medicaid expansion will remain blocked.
For more North Carolina government and politics news, listen to the Under the Dome politics podcast from The News & Observer and the NC Insider. You can find it at https://campsite.bio/underthedome or wherever you get your podcasts.
This story was originally published September 28, 2022 at 9:00 AM.
