Cost vs. care: NC bill renews debate over certificate of need laws

A political fight that’s been brewing at the state legislature for years could come to a head this summer, as some lawmakers and advocates look to reverse a decision made nearly 50 years ago and change the health care landscape in North Carolina.

Health facilities in North Carolina have been required to abide by Certificate of Need (CON) laws since 1978. The laws require approval from the North Carolina Department of Health and Human Services before a provider can build new facilities, substantially expand services or add major, specialized equipment.

The original purpose of CON was to prevent “unnecessary increases in health care costs” and limit “unnecessary health services and facilities based on geographic, demographic and economic considerations,” according to the NC Division of Health Service Regulation.

Supporters said the rules ensure hospital access in rural parts of the state and also keep costs down, by stopping hospitals from entering into arms races against one another for the fanciest equipment or biggest facilities — costs that could then be passed on to patients in the form of higher bills.

Critics, however, said it’s un-American for the government to tell private businesses they can’t buy tools or build new expansions. They also said the system leads to higher costs by stifling competition. CON rulings from the state can be appealed, leading to years-long legal battles that favor deep-pocketed health care corporations. Critics said that allows big hospital chains to stomp out competition by smaller companies or individual doctors.

Senate Bill 370 is the latest effort by lawmakers to repeal CON altogether statewide. The bill, titled ‘Lower Healthcare Costs,’ has passed the state Senate and is also included in the budget proposal.

Senate Republicans have tried for years to repeal CON laws, but they’ve been stymied by their fellow Republicans in the state House of Representatives — where the hospital industry has focused large amounts of money on lobbying and campaign donations. Some minor tweaks to the rules have been passed, but efforts for a full-scale repeal have failed.

This year, however, the stakes are different. There’s new leadership in the state House — House Speaker Destin Hall has replaced longtime former Speaker Tim Moore, who’s now in Congress — and there’s a lawsuit moving forward that could lead to the entire CON system being ruled unconstitutional.

It was filed by a New Bern eye doctor who said he could perform surgeries for thousands of dollars less than the local hospital charges, but that CON laws have prevented him from being allowed to buy the necessary equipment.

The implications of repealing CON laws are multifaceted.

Supporters of repeal said it would lower costs for patients by increasing the number of facilities in an area and driving up competition between providers.

“The idea behind certificate of need was always flawed because the idea was you're going to limit supply and thus make health care more affordable, and the basic laws of economics say it doesn't work that way,” said Mitch Kokai, a senior political analyst with the John Locke Foundation. “If you want more access to care, if you want more affordable care, you want a greater supply of care.”

Those against the bill suggest without CON oversight, the growth of health care facilities could lead to unnecessary duplication of similar services in the same areas, causing higher expenses for patients and health systems.

The North Carolina Healthcare Association lobbies on behalf of hospital companies. Its chief executive Josh Dobson is among those who vocally oppose the complete repeal. A former Republican politician, Dobson served in the state House of Representatives and was elected North Carolina Labor Commissioner in 2020, although he served less than one term before resigning to take the hospital lobbying job.

In 2023, when North Carolina expanded Medicaid, part of the deal reached by Republican lawmakers, Democratic Gov. Roy Cooper and the state’s health care industry was that hospitals would agree to some CON reforms, since Medicaid expansion would bring them substantial amounts of additional funding. Dobson said those should remain the only changes, at least for now.

“Our estimates already indicate those changes are responsible for approximately $700 million in cost to hospitals,” Dobson said. “If we do away with all of CON, it would no doubt cause challenges – and that’s in addition to all of the other things that we’re facing in North Carolina: Medicaid expansion going away is on the table, state directed payments to hospitals is on the table.”

Any reduction in federal funding will trigger a shutdown under the state's current Medicaid law. It would terminate Medicaid access for more than 640,000 people in North Carolina.  

Those on both sides of the debate agree rural areas are likely to feel the biggest impact if the repeal is enacted.

Those who back repeal said it would allow providers to build in areas with less competition. Conversely, opponents argue that repealing CON would lead to the closure of already struggling facilities.

“It would create a challenge for our hospitals. No question about it,” said Dobson. “The challenges that rural and underserved areas face do get magnified more than other areas of our state that are doing better. I think CON is no different.”

Without these regulations, Kokai argued health care facilities could more quickly and easily expand to meet changing community needs – such as increasing the number of available beds.

“We’ve seen issues where different hospitals chains – usually in this area it’s Duke, UNC and WakeMed – fighting it out for a handful of beds that the state is willing to provide through certificate of need,” said Kokai. “If this process didn’t exist, they could expand as much as they wanted to.”

Kokai added, “It's a system that, in general, is rigged against innovation. It's rigged against newcomers. It's designed to help the entrenched incumbents stay in place.”

Dobson, however, argues the path to adding more beds was already addressed and simplified under the reforms passed as part of Medicaid expansion. The bill also included several other debated issues including increasing the threshold for replacement equipment from $2 million to $3 million and removing DHHS licensed ambulatory surgical facilities from CON review in populations greater than 125,000 in November 2025.

“We have a compromise in place. We’ve agreed upon language that hasn’t even played itself out yet,” Dobson said. “My ask – and I’m proud to stand with the Association for Home and Hospice Care of North Carolina, the North Carolina Health Care Facilities Association, and the North Carolina Senior Living Association – to the General Assembly is to let the compromise that we have in place play out before we add to the challenges that are already on the table, both at the federal and state level.”

If new providers only offer more profitable services, it could jeopardize essential – but less lucrative – services like emergency care or coverage for Medicaid patients in existing hospitals, particularly in low-income areas.

Several other states have enacted similar legislation to repeal or significantly modify their CON laws, including South Carolina in 2023.

If approved, the repeal of CON in North Carolina would take effect in January 2026.