A stunning obstacle to NC Medicaid expansion: hospitals

The state’s hospital lobby says its mission is to “improve the health of the communities where we live and work.” They envision a North Carolina “where high-quality healthcare is equitable and accessible for all.”

Their support for Medicaid expansion aligns with their branding. The policy will “help the working poor” and “improve the wellbeing of our state,” the hospital association says.

It may come as a surprise, then, that the hospital lobby is a major impediment to expanding Medicaid in North Carolina.

According to multiple people involved in Medicaid expansion negotiations at the General Assembly, the N.C. Healthcare Association, which lobbies for the state’s biggest hospital systems, is doing everything it can to stop a Medicaid expansion bill from ever reaching Gov. Roy Cooper’s desk.

Why?

Though the hospitals claim to care about Medicaid expansion, they seem to care much more about a set of laws that helps them block competitors from offering health services on their “turf.”

The policy is called “certificate of need,” and it gives state regulators the final say on who can offer what health services and where. Under the existing system, the state determines how many beds a hospital can offer, who can own expensive equipment to perform medical tests, and which provider can expand services.

Legislators have long sought to follow other states in paring back CON laws. The state Senate did so in the Medicaid expansion bill that passed that chamber earlier this year, but the House has not yet taken it up.

The hospitals wish to protect the status quo. Right now, they can use their billions to hire lawyers and create sophisticated consultant reports to convince state regulators to block a new provider from offering health services that might lure their patients away.

This is why the Federal Trade Commission and U.S. Department of Justice say “because CON laws can limit the supply of competitors, and not just the supply of health care facilities and services, they can foster or preserve provider market power.”

Given a choice, then, between Medicaid expansion and protectionism, the hospital lobby chooses the latter: According to negotiators, the hospitals are willing to kill Medicaid expansion to protect certificate of need.

This maneuvering comes after the hospital lobby just a few months ago moralized, “Working families aren’t a political football. Expand Medicaid now.”

The state Senate paired Medicaid expansion with CON reforms because it’s a reasonable compromise: even though hospitals don’t like changes to the protectionism that pads their bottom line, they’ll benefit financially from expansion.

But instead of working with the legislature on the compromise, the hospital lobby is stonewalling. Stephen Lawler, who leads the N.C. Healthcare Association, told hospital CEOs in an email to stop negotiating with the state Senate over CON because it’s “not only counterproductive to our messaging on our Medicaid priorities but undermines our support in the House.”

The hospitals that pretended to care so much about Medicaid expansion, then, won’t even speak with the state Senate about the bill that expands Medicaid. It’s hard to conjure a more duplicitous position.

The N.C. Healthcare Association said in an email that CON changes “would erode, even further, hospitals’ current tenuous financial position,” and for that reason they “can’t support” the expansion bill that passed the Senate.

In recent years, more states have reformed or entirely removed CON regimes for many of the reasons DOJ and the FTC articulated: the protectionist schemes likely increase, not decrease, health care costs.

North Carolina has the second-most restrictive CON laws in the nation. If there’s any hope of controlling health care inflation, CON reform has to be part of the mix.

But all of this – cost, coverage for working families – is secondary in the hospital lobby’s eyes. What comes first isn’t patients or community. It’s their own market power.

This story was originally published June 28, 2022 at 10:01 AM with the headline "A stunning obstacle to NC Medicaid expansion: hospitals."