Our Opinion: Courts should end 'certificate of need' health care monopolies

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A Winston-Salem surgeon tired of seeing his patients saddled with sky-high bills for diagnostic tests decided to do something about it — he opened his own imaging center and cut the cost of MRI scans by 65 percent.

Dr. Gajendra Singh can't drive market prices down, however, because he's competing with one hand tied behind his back. State law requires a certificate of need to install a fixed MRI machine; without regulators' approval, he's only able to offer access to a mobile MRI machine two days a week.

Singh thinks the patients beating his door down for quality, low-cost diagnostic services show more evidence of "need" than a state permission slip, so he's doing something about that, too.

Backed by the libertarian public interest group Institute for Justice, Singh is suing the N.C. Department of Health and Human Services in Wake County Superior Court in an effort to overturn North Carolina's antiquated, anticompetitive and anti-patient certificate of need law.

Section 32 of the North Carolina Constitution forbids "exclusive or separate emoluments or privileges" and Section 34 holds that "Perpetuities and monopolies are contrary to the genius of a free state and shall not be allowed." Laws that grant exclusive privileges to existing health care providers and encourage regional monopolies, Singh argues, are plainly unconstitutional. 

That claim has substantial legal precedent — the N.C. Supreme Court struck down a prior version of the state's certificate of need law in 1973. After Congress, influenced mightily by hospital lobbyists, used its power of the purse to require state-level CON laws in order to receive federal health care subsidies, North Carolina enacted a new version in 1978.

The federal law holding funds hostage to CON compliance was repealed in 1986, however, and regulators in Washington have repeatedly found that the licensing scheme for medical practices and medical equipment reduces access to care and increases costs.

"States with Certificate of Need programs should reconsider whether these programs best serve their citizens' health care needs," the Federal Trade Commission and Department of Justice concluded in a 2004 joint report. The agencies noted they "believe that, on balance, CON programs are not successful in containing health care costs, and that they pose serious anticompetitive risks that usually outweigh their purported economic benefits." 

That finding is cited in Singh's lawsuit, as is the fact that the average MRI costs patients nearly $2,000 in our state, "which makes North Carolina one of the most expensive places in the country to get an MRI scan." Singh charges $500 to $700 for most MRIs.

Advocates of CON laws, typically hospitals, health care conglomerates and their professional associations, contend that the government has an interest in preventing the duplication of health care services and that opening markets to cut-rate competitors threatens community hospitals that provide charity care. We find neither argument convincing. 

When service providers compete for business, consumers come out ahead. That's as true in health care as it is in every other economic sector. When companies are granted exclusive franchises, there's generally no incentive to improve quality or reduce costs. Service levels stagnate and patients pay through the nose.

Singh's Forsyth Imaging Center is a model for health care innovation. The good doctor believes in price transparency and provides the cost of routine imaging services on the center's website. When's the last time you were able to get an accurate estimate for a medical scan, lab work or surgical procedure before signing on the dotted line?

State Treasurer Dale Folwell says all health care providers should adopt the practice, allowing patients to comparison-shop. His main interest is stabilizing the state health plan for public workers and retirees, and reforms that will make the program solvent would also benefit private insurers and their customers.

The conservative John Locke Foundation has long opposed North Carolina's monopolistic CON laws, but Republican legislative leaders seem beholden to the state's powerful hospital lobby. Two 2017 bills that sought to repeal certificate of need requirements — filed by Sen. Ralph Hise, R-Mitchell, and Rep. Beverly Boswell, R-Dare — died in committee. Once again, cronyism trumps principle on Jones Street. 

If cowardly legislators won't act, perhaps the courts will. A win for Dr. Singh would be a resounding victory for North Carolina patients. It's time to can the CON.