A new ruling from the North Carolina Supreme Court has the potential to massively reimagine the state’s health care industry, allowing for more competition between hospitals, doctors and other medical providers.
The case in question concerns “certificate-of-need” laws, an issue that in recent years has deeply divided state lawmakers on both sides of the aisle.
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The justices’ unanimous ruling Friday could take the question away from the legislature entirely, however. It sets the stage for a trial that could soon determine whether the certificate-of-need system is unconstitutional.
Most states, including North Carolina, use certificate-of-need laws to regulate the health care industry. If a hospital company wants to build a new hospital, it needs the state government to approve the plan. If a hospital or local doctor’s office wants to buy expensive new equipment, they need the state government to sign off.
The theory is that by forcing health care providers to prove that new services or tools are actually needed — hence the term “certificate of need” — state regulators can stop unnecessary spending that would then be passed on to patients in the form of higher bills.
Some powerful lawmakers view certificate-of-need rules as antiquated or even un-American because, they contend, the rules stifle competition and give the government too much power over the health care industry. In response, hospital executives have heavily lobbied the legislature to keep those rules in place and not shake up their hold on an industry that a key lobbying group estimates as being worth $40 billion a year.
The state Supreme Court ruling Friday didn’t immediately reach a conclusion on whether to jettison North Carolina’s certificate of need laws. Rather, the justices took a case that dealt with a single eye doctor in New Bern, and ordered it to be sent back to trial with instructions for a much broader trial that will determine whether certificate of need laws need to be struck down as unconstitutional statewide.
The justices essentially ruled that the eye doctor’s complaints, if true, could invalidate the entire statewide system and that the initial trial in the case didn’t properly deal with such a broad scope. So they ordered a new trial with new instructions. “The complaint contains allegations that, if proven, could render the Certificate of Need law unconstitutional in all its applications,” the justices wrote.
Legal, political battles
The North Carolina Healthcare Association, a lobbying group for hospitals that strongly supports keeping certificate-of-need laws, didn’t immediately respond to a request for comment Friday. It wasn’t directly involved in the lawsuit. The group wrote in its 2024 legislative brief that “the law ensures access to care for medically underserved populations and prevents oversupply that can lead to higher healthcare costs for patients.”
Critics of the laws, however, argue that the entire system makes a mockery of capitalist free-market values.
They say individuals and businesses in the health care industry should be allowed to undergo whatever spending they want to if they think it will give them an edge, just like in other industries. And they argue that while certificate-of-need laws were originally developed in an attempt to keep costs down, they’ve actually had the opposite effect.
When the state Department of Health and Human Services issues a certificate-of-need decision, it can be appealed. Those appeals often lead to years-long legal battles, where multi-billion-dollar hospital chains have an advantage over smaller firms or individual doctors, who don’t have the same sort of legal budget.
That was a key part of the New Bern eye doctor’s complaint. The doctor claimed that he could perform a cataract surgery for $1,800, while the local hospital charges $6,000 for the exact same procedure. But he’s banned from buying the necessary equipment to do the surgeries, due to certificate-of-need legal rulings against him. Only the local hospital has been allowed to buy the equipment, the lawsuit says.