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.


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.