North Carolina

North Carolina Hospital Wants State to Block Competition From Two New Surgical Centers

Another illustration of how hospitals use Certificate of Need laws to limit competition, and why those laws are bad for patients.

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MANFRED WEIS Westend61/Newscom

According to the most recent census estimate, the number of people living in Brunswick County, North Carolina, in the state's southeastern corner, nearly has doubled since the turn of the century. More people means a higher demand for medical facilities of all sorts, and two hospitals are aiming to meet that growing demand by building new operating rooms.

The State Port Pilot, a Brunswick County newspaper, reports that one hospital, Novant Health Brunswick, proposes to develop a new surgery center in Leland, North Carolina, by relocating an existing operating room and adding a new one. Meanwhile, Brunswick Surgery Center LLC proposes building a new surgery center with one new operating room and two procedure rooms, also in the Leland area.

Thanks to North Carolina's Certificate of Necessity laws, though, only one of those proposals will become reality—and both could be blocked if a third hospital gets its way.

Earlier this week, Reason released an investigative report that examined how Certificate of Necessity laws for medical facilities artificially limit the supply of medical care, drive up the cost of care, and give patients fewer options—sometimes with tragic consequences. More than 30 states have CON licensing laws on the books, giving state-level central planners the final say over hospitals' capital expenditures.

Often, these laws are wielded by politically connected medical providers as a way to limit competition—our investigation focused on how a single Virginia hospital prevented another nearby hospital from building a neonatal intensive care unit, despite the project having support from local officials, residents, doctors, and hospital administrators.

A similar story is now playing out in Brunswick County, North Carolina. As part of its 2016 State Medical Facilities Plan, the North Carolina Department of Health and Human Services determined there was a "need" for one more operating room in the county.

The two medical providers that jumped at the chance to fill that need have to compete with each other for permission from the state government, but they also have to compete against a third hospital that's challenging both applications.

Administrators and trustees for Dosher Memorial Hospital in Southport, North Carolina, are opposed to the construction of a new surgery center, according to The State Port Pilot. At a public hearing last week, Dosher executives officially announced their opposition to both proposals, arguing that approving either one "would pull patients away from Dosher Memorial Hospital and greatly impact its financial survival."

The ongoing fight in Brunswick County reveals the absurdity of CON laws. If Dosher Memorial Hospital is worried about losing patients to newcomers, it should compete for those patients by offering better quality of care or lower prices than its competitors. It should not be able to appeal to a state agency and use the power of the government to drive those potential competitors out of the region.

Unfortunately, this is exactly what happens when the government is given the authority to regulate competition through CON licensing laws.

Certificate of Necessity laws—sometimes called Certificate of Public Need laws—were created in the 1970s and 1980s under the theory that states should control medical facilities' capital spending in order to prevent surpluses of expensive medical tech and keep costs for patients down. They haven't worked. States with CON laws generally have higher costs and lower quality care.

"CON laws raise considerable competitive concerns and generally do not appear to have achieved their intended benefits for health care consumers," the Federal Trade Commission and the U.S. Department of Justice said in a joint statement last year calling for state governments to roll back CON laws in order to free health care markets and lower prices. The agencies warned that these laws have been exploited by competitors seeking to protect exclusive markets by raising the cost of entry.

In North Carolina, hospitals have to get state approval for almost any new service or facility. Everything from surgery centers to the addition of hospital beds must be approved by the state Department of Health and Human Services, which uses a data-driven formula that produces the annual state Medical Facilities Plan, a 450-page inventory that accounts for all types of health care settings and services delivered across the state.

"North Carolina has one of the most micromanaged CON programs in the country. The SHCC regulates over 25 services, and it can take years for new and established health facilities to break ground," writes Katherine Restrepo, a Forbes contributor who covers healthcare issues in North Carolina.

Regulating what services a hospital can offer makes about as much sense as letting the state government determine whether there is a need for more Chinese restaurants in a certain area, wrote Ray Cordato, an economist with the John Locke Foundation, a Raleigh-based free market think tank, in a 2005 report.

These laws persist because hospitals derive huge benefits from them and lobby hard to keep them on the books. An effort to reform North Carolina's CON laws last year was derailed by hospital lobbyists.

A similar reform effort is now underway in Virginia.

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  1. But we need these laws. It’s right there in the name!

  2. The Certificate of Need system is proof that our medical industry is an unregulated wild west.

    1. greedy free market capitalists.

  3. OT: DREW CAREY THAT WAS HIS KID FUELING THE FIRE At D.C. Trump Protest

    Perhaps of some interest to the Reason commentariat. Drew Carey’s son started that fire outside of the Deploraball celebration in DC. Thankfully, dad was none too pleased or something.

    1. Lucky he’s 11, or he’d be looking at a felony and ten years jail time.

  4. Without these common sense regulations, I fear there will be a race to the bottom. I mean, that’s what Marx taught us about capitalism. Competition is a race to the bottom, people! It’s science.

  5. We don’t need two ICUs in this area.

    Great. Close your old germy one when we open our shiny new one.

  6. Can anyone tell me what the hell has happened to the comment section here? I’ve lurked here for years, and have always liked to read the comments in order to get libertarian takes on various issues. However, now it seems that 50% of the comments are about sucking Trump’s dick and bitching about how Reason hasn’t been pro-Trump enough. I’m fine with bitching that Reason isn’t being hard enough on liberals, but Trump is not remotely libertarian and is not intentionally pushing Libertarian principles. Reason should be very, very scrupulous in regards to his presidency. Also note that Reason should be focused more on “taking down” Republicans, as they have all of the power currently. The net effect of his presidency may end up be a positive, as he seems to be weakening government in some areas, but he is in no way keen on reducing the power of the presidency.

    What I’m trying to say is: fuck these new posters. Please return to Fox News, or at least become aware that this website is not to be Trump’s propaganda wing. (Assuming they’re all new, and that people haven’t simply been led astray.)

    1. Do you have a newsletter?

    2. They got comfortable here the past 8 years, since Reason was understandably harsh on Obama. I expect that many of them will leave soon, just as our worst progressive trolls did after the GWB years ended.

    3. Counter – the people who are most pro-Trump aren’t new at all. And many of the older commenters who have left *seem* to have done so more as a result of Reason’s own declining standards in coverage.

      1. As ever, we should distinguish between “pro-Trump” and “anti-fake news”.

        1. huh, it’s almost like we should look at specific actions instead of who is behind them? Obama not fucking with the states legalizing was good; Obama raiding medical pot places in cali was horrible. Trump building a wall or jacking tariffs is bad, Trump eliminating regs by executive order is a good thing in a bad way.

          1. Hey, take that rational bullshit elsewhere, bub. This ain’t “Reason” maga . . . oh, wait.

          2. And that’s the problem with being overly hyperbolic about Trump in general. If Trump does do some of the libertarian-leaning things he seems to be aiming for, school choice, eliminating regulations, going after various departments, etc., libertarians, and Reason itself, are going to have to defend at least that aspect of his Presidency. And that doesn’t really jibe with the whole “he’s an unqualified monstrous buffoon” image some of the writers are going for.

            1. I heard a pundit say that those who did not get Trump did so because of an insistence on taking him literally rather than seriously.

              Is he really after higher tariffs with Mexico or he simply tossing out a starting point for negotiations. He’s not of the political world so his tactics will be different. Ultimately, he should be judged on success or failure.

      2. Nah hiring someone like Robby Soave that cites Buzzfeed as a source (the least of his problems) or ENB who seems to still be figuring out the whole libertarian thing as she goes, does not mean they have declining standards….

        1. While ENB probably isn’t going to score highly on a libertarian purity test, she is very libertarian on what she covers and it’s a often ignored aspect of libertarianism. She’s done some quality work. I’m not a Robby fan and what he writes tends to be click bait. Ironically, despite being the most cosmo of the cosmos at Reason, he provides the most red meat being on the crazed SJW beat.

          There are some people at Reason who have done a pretty good job covering certain subjects who have lost their mind over Trump.

          1. she is very libertarian on what she covers

            Well, if you think opposing due process protections for people accused of rape is libertarian.

            I generally like ENB, but she really screwed the pooch on that “OMG! Corroborating evidence!” issue.

            1. I also generally like ENB. Claims of libertarian purity aside, her application of libertarian principles is haphazard at best and she seems to be figuring it out day by day, which is fine for someone who is not a fairly prominent writer for a libertarian publication.

    4. Presidential elections tend to bring out the worst in the commentariat. Give it some time and things will return to whatever is normal around here.

    5. I think that some Reason writers can be fairly criticized for being a bit overwrought about Trump. But you are right, the comments have gotten kind of annoying lately.

      Elections bring out the worst in people, it seems.

      1. It’s makes for murky waters when the vast majority of Trump coverage is foaming-at-the-mouth hyperbolic insanity and outright lies of convenience, when genuine criticism of the guy is entirely warranted. I just prefer to not see Reason jump on the same bandwagon that has obliterated the credibility of every publication and journalist that takes it for a ride. Robby, Dalmia, Shackford, Chapman and Gillespie all come to mind as writers that are working tirelessly to make their coverage less credible. That said, Reason still has plenty of others that are still very credible with their criticism.

        1. Well, it’s partially your fault if you’re reading Dahlmia or Chapman in the first place.

    6. When a libertarian comment section is shrugging at the possibility of massive tariffs, it does make you wonder. At the same time though, I think a lot of it might just be an involuntary reaction to the hysterics of the left regarding all things Trump, especially since much of their hysteria is directed at the things libertarians actually can be excited about, like school choice

      1. It’s hard to have a reasoned debate over Trump’s trade policies when they are only a slight step-up from the crap coming from the Democrats on the same subject. Do people forget that Hillary was as likely to spurn free trade deals as she was to embrace them? Or that her own base is rabidly opposed to them? I mean, the article this morning pointed to the Obama admin’s own position on ‘economic patriotism’ as a comparable example of what Trump is bringing to the table.

        It’s very likely that we were going to get bad policies on trade regardless of who became president. Open borders have always been more controversial among libertarians than trade.

        People also forget that of the people who are most pro-Trump, at least one or more has never claimed to be libertarian. But they’ve been on this blog commenting for a very long time.

      2. I love watching what is going on with the left. The comments here are still insufferable. It’s as if John cloned himself. Maybe all of these people are the same guy.

        1. John is not a libertarian and one of those being referenced above. He has never claimed to be, as far as I’m aware.

          1. I always thought he was a libertarian leaning conservative. Some call them “conservatarians” I think.

            1. No, John is red to the bone. He’s never been dishonest about that.

              1. Yet opposes the drug war (as I recall) and is at times critical of police and muscular foreign policy. That’s not “red to the bone”.

                1. Hands-off Republican?

        2. It’s as if John cloned himself.

          Most horrifying thought of the day.

          1. What, after we experience amsock actually cloning itself all over the board? Pssht.

          2. It was the only way he could fight all the MNG clones. He may have won that war, but they came with their own set of problems.

            Hit y Run: The Clone Wars II : Red Scare

      3. The current hysteria from the center-left over what really doesn’t seem to be that far from center is confusing.

      4. When a libertarian comment section is shrugging at the possibility of massive tariffs, it does make you wonder.

        In contest of tariff’s versus income tax, tariffs are the way to go. One is essentially a consumption tax and the other is a virtually inescapable penalty for being productive. That aside….

        What alarms me is the commentariat not just shrugging, but promoting, the notion of a “guaranteed basic income” welfare scheme and writers like Gillespie casually declaring his support for the concept of welfare statism.

        1. writers like Gillespie casually declaring his support for the concept of welfare statism.

          This isn’t new though, that’s been Gillespie’s stance forever.

          1. I’m not sure how the length of time he’s been wrong about the efficacy of welfare statism changes things. So he’s just been wrong and misrepresenting aspects of libertarianism for a lot longer than others. Not a point to his credit. If he does it again tomorrow, he’ll be wrong then too.

            1. My point is that apparently you’ve been alarmed for quite a long time then.

                1. You’re hand-wringing about a concept that’s been floating around libertarian circles since Friedman. “Alarmed” is emotionally charged language that’s attempting to make it sound like it’s an unheard of position when it’s fundamentally not. Ok, you’re alarmed, so what?

                  1. Good lord, “emotionally charged language to make it sound like an unheard of position”…. I think you’re reading way too much into it. The word “alarmed” has certainly filled your panties with sand. It was a turn of phrase responding to someone else’s criticism of the right libertarians on these very boards. If I retract the word “alarmed” would you stop playing semantic games?

                    I couldn’t give half of one flying fuck how long the “idea has been floating around”, a person is allowed to criticize someone for being wrong even if they were wrong twenty years ago or more. A libertarian supporting welfare statism SHOULD be an unheard of position, the fact that such a position has been around a long time is all the more reason to throw water on it. So you get “emotionally charged” when you read the word “alarmed”, so what?

                    You’ve done nothing but complain about semantics and fend off some strawman version of my argument. I never said anything about this being a new position for Gillespie, just that he does it and I think he’s wrong.

                    1. The word “alarmed” has certainly filled your panties with sand.

                      I’m not the one getting irrationally snippy, and seem to be far less ’emotionally charged’ about the issue than you are.

                      A libertarian supporting welfare statism SHOULD be an unheard of position

                      If we’re playing purity games, a libertarian should never articulate an argument in favour of tariffs either, yet you’ve done so as a pragmatic concession rather than an income tax. Almost like how GBI arguments tend to be based on pragmatic concessions or something.

                    2. I’m not the one getting irrationally snippy, and seem to be far less ’emotionally charged’ about the issue than you are.

                      Yeah you accuse me of hand-wringing and claim that I argued this was a new position for him. Which I didn’t. Maybe don’t lie.

                      If we’re playing purity games, a libertarian should never articulate an argument in favour of tariffs either

                      I wrote:

                      In contest of tariff’s versus income tax, tariffs are the way to go.

                      I said one form of tax is preferable to another.

                      Almost like how GBI arguments tend to be based on pragmatic concessions or something.

                      Except GBI isn’t something that is even remotely necessary to keeping even a minimalist state afloat. Welfare statism ought to be opposed root and branch. Abolishing all taxation is a laudable position, but a worthless one in any context other than when one is discussing the abolishment of all compulsory government along with it. You make it sound like any libertarian that has tax policy preferences is duty bound to support welfare statism. Well no, GBI is not a necessary component of statist governance.

                    3. And furthermore Gillespie isn’t just in favor the GBI as an alternative to welfare, he is generally in favor of welfare period. That’s what I’m talking about. You can’t tell me that I’m in favor of tariffs generally, only in the aforementioned context.

                    4. Yeah you accuse me of hand-wringing and claim that I argued this was a new position for him. Which I didn’t. Maybe don’t lie.

                      Because you are hand-wringing, which is why you’re now going on about how your compromise with libertarian orthodoxy is fine while others are wrong and should be criticized. You’ve held up a system that prevents free trade between individuals as a preferable to another method. Restriction on trade, Free Society, ought to be opposed root and branch by libertarians, but for specific reasons that’s a compromise you’re willing to make. I’m not even saying it’s a bad compromise, just that you’re arbitrarily criticizing people engaging in the same behaviour as you. You’re both misrepresenting aspects of libertarianism, but it’s fine so long as your priorities are met.

                      You make it sound like any libertarian that has tax policy preferences is duty bound to support welfare statism.

                      You accuse me of lying, and then put words in my mouth? Good job.

                    5. Because you are hand-wringing, which is why you’re now going on about how your compromise with libertarian orthodoxy is fine while others are wrong and should be criticized.

                      Right, I said income taxes are worse than tariffs because they’re virtually inescapable. Gillespie says that he supports the welfare state. Those are totally the same thing.

                      You’ve held up a system that prevents free trade between individuals as a preferable to another method.

                      I guess you think the exchange of labor for money isn’t an exchange? I said one form of taxation is less bad than the other.

                      Restriction on trade, Free Society, ought to be opposed root and branch by libertarians, but for specific reasons that’s a compromise you’re willing to make

                      And Gillespie said he supports the welfare state with no caveats or context. Just that he supports it.

                      You’re both misrepresenting aspects of libertarianism, but it’s fine so long as your priorities are met.

                      You’re misrepresenting someone’s argument, that’s what you’re doing. That’s what I expect from you.

                      You accuse me of lying, and then put words in my mouth? Good job.

                      I accused you of lying because you lied. Like a lying liar who lies. What I did, was boil your argument down and said that you “make it sound like”, which is an assertion about how your argument is received, not a verbatim quote of how you said it. Stop lying.

                    6. example of a lie:

                      “Alarmed” is emotionally charged language that’s attempting to make it sound like it’s an unheard of position when it’s fundamentally not.

                      You explicitly asserted that the word “alarmed” contained an entire claim about the newness of Gillespie’s position on welfare. That’s just a plain lie.

    7. There’s a ‘range’ of opinions when it comes to Reason’s Trump coverage. There’s your diehard Trumpites, John and SIV, and then you’ve got the more right leaning libertarians, the people who just want to see the left suffer, and the people who argue that Reason’s coverage is poor because they’re overwrought, as Zeb points out. I tend to fall into the latter category, and only because of the blatant lack of standards I’ve seen Reason sink to. For Christ’s sake, during the election they ran a “DUR HUR Trump’s logo is a penis’ article followed by one that openly promoted dishonest defamation against Trump, saying he admitted to sexual assault.

      1. Personally, I wasn’t here eight years ago, but can anyone confirm whether Reason was attempting to psychoanalyze the President and break down his personality dysfunctions? Did they do that at all over the last eight years, throwing around the term narcissist to accurately describe Obama’s pathological personality issues? I would argue that a lot of the Reason writers have, due to the nature of their work, openly absorbed an unconscious bias: That of TOP MAN-style elevation of politicians to a position above the plebs. That’s not to say they don’t criticize their policies obviously, but they don’t spend time digging into the secret personality issues of career politicians. Trump’s obviously not a career politician, and a blunt, ‘wrong kind of person’, so they both criticize the policy, and target him as an individual in way they simply don’t with most politicians. This is not a ‘BUT OBAMA’ criticism, this is about how Reason discusses career politicians in general in comparison to how they discuss Trump, and I think the bias should be pointed out. I could appreciate a Reason that holds Lindsay Graham to the same standards they hold Trump to, but I think they’re rather unwilling to apply this policy broadly. I think that criticism is at least valid, the “TRUMP IS A GENIUS AND YOU’RE STOOPID” ones, less so.

        1. One could cut them a little slack as Trump is specifically trying to be an “outsider”.

      2. followed by one that openly promotedcommitted dishonest defamation per se against Trump, saying he admitted to sexual assault.

      3. Nice, reasoned critique. Compare that to some of the usual “you’re a retard and everything you’ve ever said in your entire life is retarded so just shut up” style of critique.

        But I would add this: I’m willing to cut Reason a lot of slack because if you’re like me and figure the best you’re ever going to do is pull the GOP in a libertarian direction, who’s a bigger threat – the Democrat Hildabeast that everybody knows is an evil wicked witch and is opposed to everything you stand for or the Republican Trump who’s going to sweep in and carry the GOP off in an un-libertarian direction? With both major parties now unabashedly pro-Top Men Big Government supporters, where do us libertarians go?

        I sure did like the idea of Trump coming in and destroying the GOP – his winning, however, was an unexpected tragedy because now the GOP is stronger than ever. It’s just no longer going to feel the need to even pretend they’re in favor of smaller government. Had Trump lost but taken down the GOP establishment, maybe the next time around people like Rand Paul – not a libertarian, just more libertarian than most Republicans – would have a better shot at taking charge. As it is now, who cares what libertarians think? We got us a winner in Trump! And winning is all that matters to them. (Take a look at where Reince Preibus is right now if you think Trump and the GOP establishment are mortal enemies and libertarians have any tactical space left in the GOP.)

        1. It’s just no longer going to feel the need to even pretend they’re in favor of smaller government.
          Are you sure? Trump’s election was, in large part, a repudiation of the mainstream GOP. And before we get really carried away, James Carville wrote a book on the heels of Obama’s election presaging a 40-year Dem dynasty. How’d that work out?

    8. Concern troll is concerned.

    9. I think what you’re seeing here is that not all of the posters are libertarian so much as they are libertarianish. Libertarianism is a philosophy so any discussions purely libertarian tend to be abstract theory, when you start getting into more real-world arguments you’re drifting away from philosophy and libertarian. Some of them are at heart libertarian Republicans who think the best you’re ever going to get is to pull the GOP in a libertarian direction so it’s counter-productive to slam the GOP too hard – you can catch more flies with honey than with vinegar and all that. Praise Trump when he does something libertarianish, don’t criticize him when he does something un-libertarianish because then he’ll get all butthurt and mean and spiteful and do even worse shit.

      I saw the election as a choice between a malignant brain tumor and leprosy. You don’t vote for leprosy because you actually like leprosy, you just vote for leprosy because at least it’s not as bad as a malignant brain tumor. It was my impression that a lot of people here felt the same way, but you’re right, there sure are an awful lot of people here who seem suspiciously like they’re actually enjoying the leprosy. Give ’em their honeymoon period and the benefit of the doubt, they’re just a little giddy at the news they don’t have a malignant brain tumor – it’ll take a little while for them to remember that they still have leprosy and they should really get that looked into.

      1. So far leprosy has given us a better look at a libertarian moment than I can recall in my lifetime.

        Naturally, it will all be in the execution, but still . . . .

    10. Can anyone tell me what the hell has happened to the comment section here?

      Sure, the Reason writers went full “literally Hitler” on Trump about a year ago, and haven’t let up. As a result, some of the commenters have been bitching and moaning about the clickbait style of coverage Trump has gotten here, and are currently bitching because Trump hasn’t really done much yet, but the “literally Hitler” barrage continues.

      You can best notice the subtle difference between “pro-Trump” and “anti-fake news” in the Rand against torture thread. Nobody is coming out in defense of Trump on that thread. Some are saying that everybody is playing right into his hands by covering it, but that’s as close to pro-Trump as you get in that thread.

      I think there’s a large group of us who are bored of Reason getting led around by the nose by the Buzzfeeds and CNNs of the world. Report on the real negative shit that Trump has done. Leave the clickbait for Buzzfeed. The boy has cried wolf enough times now that we just kinda roll our eyes when he sees another one.

  7. Virginia yesterday, North Carolina today – we doing all the states? When are we going to do one of the states that doesn’t have a totally screwed-up idea of how the market works when it comes to me buying medical care as opposed to how it works when I’m buying bread or shoes or notebook paper?

  8. This is what a “Free Market” publication should be burning cycles on, not the utterly disposable Twittertantrum of the day.

    /RDS off

    1. Maybe Reason should apply the same standards to H&R as it does the print edition…

      1. I don’t think it necessarily has to be exactly the same, but I think they should ask themselves whether anybody is gonna give a shit about the crisis of the day in a week’s time. If yes, then publish. If no, then shitcan the article.

  9. Looks like we’re going to need the red pens in NC today.

  10. I wonder how many people who want govt further immersed in health care will be among the first to bitch about this.

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