Medical equipment

North Carolina Doctor Sues to Break Up State-Enforced Medical Cartels

A new lawsuit from the Institute for Justice is challenging the state's certificate-of-need laws.

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Institute for Justice

Should a licensed doctor have to ask the government and industry competitors for permission before purchasing potentially life-saving medical equipment? That's the question at issue in a new lawsuit challenging North Carolina's "certificate of need" laws.

In 2017, Dr. Gajendra Singh opened a medical imaging center in the town of Winston-Salem with the goal of providing MRIs, ultrasounds, and other screenings to patients at prices that were both lower and more transparent than what they were paying at the existing local hospital.

Singh was able to either purchase or lease the X-ray scanner, CT scanner, and ultrasound machines he needed without incident. But when it came to getting an MRI machine, he hit a wall.

The state of North Carolina requires medical service providers like Singh to go through an arduous application process to prove that they need an MRI machine before they are allowed to buy or lease one. Need, mind you, is determined not by how many patients are asking for services, but rather by how many MRI's the state's Department of Health thinks an area requires.

In Singh's case, the Health Department had determined that two local hospitals operating MRI machines is more than enough for the Winston-Salem area. Thus, Singh has been denied the "certificate of need" that would allow him to get a machine of his own. Instead, he has been forced to rent a portable MRI machine two days a week, limiting the number of scans he can perform, and effectively preventing him from competing with the incumbent hospitals.

The good doctor is now suing the state Department of Health as well as the governor and members of the state legislature in order to overturn the law that's hamstringing his practice and depriving his patients of medical services he would otherwise be able to provide them.

"As a medical doctor, Dr. Singh took an oath to help people in need, yet the state is standing in his way to protect established medical providers from competition," says Renée Flaherty, an attorney with the Institute for Justice, a public interest law firm representing Singh. "That's plainly unconstitutional."

North Carolina's constitution prohibits the granting of either monopolies or exclusive "emoluments" i.e privileges to the private entities.

In a compliant filed today, the Institute for Justice argues the state—by requiring that medical service providers obtain a certificate of need to own an MRI machine, and then give out a limited number of such certificates to select health care providers—is in effect handing out monopolies and exclusive privileges to those providers lucky enough to get the certificates.

Not only is this practice potentially unconstitutional, it raises prices for consumers. Singh's lawsuit claims the average MRI costs just under $2,000 in the state of North Carolina, a service the doctor's imaging center usually provides (when it has a machine available) for somewhere in the $500-$700 range. Because his practice posts all their prices on line, patients are not left with unexpected bills.

Absent North Carolina's certificate of need laws, Singh would be able to service far more patients than he currently does, helping them get access to the care they need. Subject to the competitive pressures of a freer market, the hospitals in his area would likely have to lower their prices to stay in business.

Singh's practice is not the only one stifled by certificate of need laws. As Reason's Eric Boehm reported last January, two providers in Brunswick County have had to fight tooth and nail for permission to open the one new surgery center the state is allowing in that county, while a local hospital has done everything it can to sabotage this effort.

Should Singh's lawsuit prevail, the state would be prohibited from enforcing its certificate-of-need laws, allowing most any qualified medical service provider to offer whatever services people are willing to pay for.

That would be a blessing for patients' financial and physical health alike.

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44 responses to “North Carolina Doctor Sues to Break Up State-Enforced Medical Cartels

  1. I just can’t figure out why healthcare costs are so high.

    1. As someone in the medical industry, who used to work on some of the devices mentioned in teh story, it does not at all surprise me. It’s not a bug in the system, it’s a feature. We have salesmen who job it is to peddle to government regulators. Seriously. In a previous job a big “win” for us was a salesmen managing to convince an EU regulator to add a “checkbox” feature that only our product provided.

      I currently wondering how the hell my current company even makes money, given how bloody long it takes to get a product out the door. And I’m not talking about FDA approvals and stuff like that, which merely add a decade to the time to market. But stuff like 1960s era engineering practices. Like the abject refusal to use POTS systems. Then I realized how we make money. Because the healthcare industry pays whatever ridiculous price is set in front of them. Patients don’t care, patients aren’t seeing a price sheet. Insurance doesn’t care, the patients pay for it through premiums. Government doesn’t care, they automatically pay 80% of whatever price is put in front of them.

      I stay in the industry because these devices genuinely safe lives. But I really do wish our products where sold in an actual market system. It would shake a lot of the cruft out of the industry.

      1. Insurance doesn’t care,

        One bone to pick, insurance DOES care because they can’t always recover the costs through premiums. For instance, insurance companies care very deeply if you get the generic drug vs. the name brand. The cost difference can be measured by orders of magnitude, and the drug companies do everything they can to get you to choose the name brand, while the insurers do everything they can to get you to choose the generic.

      2. “I currently wondering how the hell my current company even makes money, given how bloody long it takes to get a product out the door. ”

        It is entirely possible they are not making money any more. As an industry returns on investment for new pharmaceuticals has dropped to near the cost of money, and will shortly go below that level.

        https://tinyurl.com/y9j4yuz2

  2. Now end medical licensure and legalize all drugs.

    1. ^ This.

    2. Well, not all drugs. I mean, no tobacco or sugary drinks, right?

      1. I mean, no tobacco or sugary drinks, right?

        Well, that goes without saying. We’re not crazy here.

  3. Healthcare consumes an ever-growing share of GDP because it has never been more awesome.

    1. Just like with education. /sarc

      1. Everything gets better when the government makes it easy for people to make subjectively correct choices from severely restricted options.

  4. “Singh’s practice is not the only one stifled by certificate of need laws. As Reason’s Eric Boehm reported last January, two providers in Brunswick County have had to fight tooth and nail for permission to open the one new surgery center the state is allowing in that county, while a local hospital has done everything it can to sabotage this effort.”

    Part of the equation is that the politicians have enacted these protectionist schemes to help hospitals pass off the costs of their emergency rooms that have to take people regardless of the ability to pay – courtesy of another (unconstitutional) federal law.
    The hospitals make up those unpaid costs by overcharging those who can pay. If other medical service providers open up practices offering those services at lower costs, then they will lose those patients and won’t be able to overcharge them to cover their emergency room losses.

    1. then they will be charging real cost instead of embedding it in everything else they do

    2. The hospitals make up those unpaid costs by overcharging those who can pay.

      It’s almost like the hospitals depend on “young invincibles” to cover the costs of the infirm.

  5. WHERE do I get a “certificate of need” that certifies my needs for Government Almighty to come and hug and kiss me, and sing me a lullaby to help me get to sleep?!?! HUNH?!?!

    Scienfoology Song? GAWD = Government Almighty’s Wrath Delivers

    Government loves me, This I know,
    For the Government tells me so,
    Little ones to GAWD belong,
    We are weak, but GAWD is strong!
    Yes, Guv-Mint loves me!
    Yes, Guv-Mint loves me!
    Yes, Guv-Mint loves me!
    My Nannies tell me so!

    GAWD does love me, yes indeed,
    Keeps me safe, and gives me feed,
    Shelters me from bad drugs and weed,
    And gives me all that I might need!
    Yes, Guv-Mint loves me!
    Yes, Guv-Mint loves me!
    Yes, Guv-Mint loves me!
    My Nannies tell me so!

    DEA, CIA, KGB,
    Our protectors, they will be,
    FBI, TSA, and FDA,
    With us, astride us, in every way!
    Yes, Guv-Mint loves me!
    Yes, Guv-Mint loves me!
    Yes, Guv-Mint loves me!
    My Nannies tell me so!

  6. I really hope this doctor is successful. The “certificate of need” is a cancer on the American Medical system rising prices, blocking access, and no one on the left seems to even notice it.

    1. most politicians like certificate of need because then they are the power player that everyone from hospitals to citizens have to go to and beg for help. power corrupts and those who are corrupted by power are evil

    2. and no one on the left seems to even notice it.

      In fact, an argument I’ve heard from the left is that one of the main reasons healthcare is so expensive is because there are too many hospitals.

      Luckily, in CA we have OSHPD, so we don’t need “Certificates of Need.” Our legislature recently decided that our hospitals aren’t seismically sound enough, and essentially mandated that by 2020 you either need to have a brand-new acute care tower or you need to close.

      My fellow Californians, of course, look at all the hospital closures going on and blame the evils of Capitalism.

      1. Prog thinks there are too many hospitals ?- damn capitalism!

        Prog thinks there are too few ?- damn capitalism!

        Everything is capitalism’s fault, not their damn government. Maybe, just maybe, they don’t know shit, or are really just mad other people don’t agree with them on everything

        A center / right person looks at a fence in the middle of a field and says- there must be a reason for that fence, let me find out why.

        A leftist looks at that and says – I don’t see the need for that fence, let’s tear it down

        1. This could be one of the bigger divides. One aspect of conservatism is that in seeking to retain what is they are more inclined to understand why it is as it is. Progressivism sees a desired action or result as an end to itself and finds anything opposing it to be evil.

      2. If they argue that “healthcare is so expensive because there are too many hospitals”, call them what they are. SCIENCE DENIERS. Economics has a better foundation as a science than climate science, but leftists call others “science deniers” while denying economics science and Biology. Throw it back at them.

    3. I completely agree. Certs of Need makes my blood boil perhaps more than any other completely useless and totally cronyist regulations. Its so goddamn obvious how destructive these things are and almost NOBODY knows they even exist.

  7. I wish you the best !!!

  8. Good luck to Dr. Singh!

  9. I don’t think most people know what regulation really means. They think it’s the government preventing those evil companies from killing us…

    If my prog roommate wants to open a comic book store, I wonder his reaction if I told him, well you need to get approval from the government and prove there is a need for your comic book shop. Oh there’s too many in an area already according to some person in government, well you can’t open one up then

  10. Dr. Singh is a GI Surgeon, not an imaging specialist.

    He has built a center and there is no shortage of MRI vendors willing to build a scanner. It starts with a room built as a faraday cage and gets more complicated. They will do it as a lease. We know he will have hired radiologists, certified technologists, physicists, otherwise nobody will send him patients.

    There are self referral and conflict of interest issues with that. He will need to answer those issues.

    Certificate of need should have been gone long ago. There is no shortage to be allocated by the state.

    1. What’s wrong with self-referral if the patients are paying cash and the doctor is broadening access to the service? Otherwise I agree that it’s ridiculous to stop him from doing this.

      1. There is nothing wrong with what he is doing. He just has to be careful about his own patients because there is a potential conflict of interest.

      2. “What’s wrong with self-referral if the patients are paying cash and the doctor is broadening access to the service?”

        Nothing is wrong with self-referral. So as it is disclosed to whoever is paying and they have the option to choose another provider.

  11. They do a similar thing in Connecticut about Lithotripsy machines. That’s the device that breaks up kidney stones so they can be passed through the body without an operation.

    These machines are few in number and they can only be used by certain ppl and they travel from hospital to hospital. The price for using one is kept high and no one can purchase one and set up a specialized practiced based on having it.

    It’s despicable and costly. It needs to be stopped.

    1. What stops people from building one of their own?

      1. Right! I suspect there are plans on the web to print one.

      2. Nothing really. You immerse the patient into a salt water bath, then hit just the right spot with some high energy shock waves.

        Of course, hit the wrong spot and you could kill them instead.

    2. You can buy one if you have enough volume to justify the cost. A Urologist can be more efficient scheduling lithotripsy procedures back to back on certain days. The hospital or outpatient center can take advantage of the portability without capital investment with a lease or fee per case arrangement If you don’t need it every day. There are MRI and PET-CT scanners on trucks that do the same thing for smaller hospitals.

  12. I don’t understand why reason.com is okay with gov’t-backed mandates in this case, but when it comes to broadband competition you’re on the opposite side?

    I think if you were a hospital you could make similar arguments to what cable/internet providers make. It’s expensive to start a hospital. Having reduced competition helps hospitals recoup these expensive costs. Or I could make arguments I see others make against competition in broadband. You already have a choice for MRIs: take it or leave it.

    In both cases, I think competition is always better. I’d say it’s a pretty rare circumstance when a government-negotiated monopoly or oligopoly benefits consumers.

  13. Straight out of Atlas Shrugged.

  14. Imagine supply and demand for such things determined by the market forces instead of arbitrary government decisions. I can dream can’t I?

    1. Right? How terrible!

  15. All certificate of needs laws are unconstitutional. Long time they all come down.

    1. They might have made some sense in the past when these things were rare commodities. Now they are just using CON as political tools. Medicare already plays games by paying different amounts for the same MRI or whatever.

      Of course there are volumes of regulations anyway on specifications, safety, and billing. An MRI scanner is kinda like ordering a plane from Boeing. How much does it cost? Well that depends. They are built along with the room and control room. The room with the scanner for example is a faraday cage, it has a copper mesh shielding because you need a clean RF environment. Then you have a liquid helium system to chill the magnets which are superconducting if you are above 1T. Anyway it is a big deal.

      Even basic x ray you need comply with all kinds of regulations. It is radiation after all.

    2. While I certainly oppose all forms of CoN, I’m not sure they are flatly unconstitutional.

      States restrict or license all sorts of activities – from carnivals, and liquor wholesalers, to professional practice, etc. And while I do not like any of them, and would like to see them all eliminated, they are constitutional.

    3. This cartelization is also the reason why many cities restrict all but a very few or only one…
      emergency ambulance provider.
      Broadband provider
      Hospital
      Anything else?

    4. This cartelization is also the reason why many cities restrict all but a very few or only one…
      emergency ambulance provider.
      Broadband provider
      Hospital
      Anything else?

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