EDITORIAL: Eliminate CON Laws, lower healthcare costs

"What's good for the goose should be good for the gander" as the saying goes. But that is not the case when it comes to providing health care for state employees, both active and retirees, and the rest of North Carolina's citizens who are underwriting the state's health plan.

This past week, the N.C. State Health Plan which provides health coverage for active and retired state employees entered into a contract with Lantern, a company that, according to its website, specializes in providing access to "complex, high-cost care- surgery, cancer and infusion therapy." The company notes that these medical services "make up 50% of healthcare spending."

It seems paradoxical if not outright hypocritical that the state health plan is so concerned with the rising cost of health care, and of course health insurance, that the plan directors are contracting with a private company to get lower costs, yet the state continues to support legislation that restrains competition in medical services that would benefit the average taxpaying citizen by maintaining a Certificate of Need Law.

The State Health Plan directors were motivated to contract with Lantern out of concern with rising medical costs and a growing deficit in the health plan which is a state funded benefit for which the state taxpayers are contractually and financially responsible to provide.

David Beasley, writing for The Center Square, noted that efforts to work with a third party medical provider for similar services had previously failed but that the current financial conditions of the plan dictated another try. When Thomas Friedman, executive direct of the N.C. State Health Plan, took leadership of the plan in 2025, according to Beasley's reporting, "it was facing a $570 million deficit in 2026. Without action, the deficit would have grown to $1.4 billion by 2027, Friedman said."

Just weeks prior to this announcement a bipartisan three judge court panel upheld what amounts to a state mandated monopoly for very services that the State Health Plan is seeking to go around the state's Certificate of Need Law or CON law as it is known.

For more than five years, Dr. Jay Singleton, a New Bern Ophthalmologist, has challenged the constitutionality of the state's CON law that has restricted his use of a surgery center that he has constructed in his practice and which he would provide to his patients at a much lower cost than the hospital facilities that he is now required to rent. Just before Christmas, the court rejected Singleton's argument, upholding the constitutionality of the state's CON law.

Under the current law a vast majority of the specialized medical treatment facilities and specialized services require certification from the state's Department of Health and Human Services to operate. In addition to surgical centers that are not part of hospital facilities, this state bureaucracy also approves the operation of nursing homes, hospital ambulatory cancer care, cardiac amenities, substance abuse treatment beds and hospice care facilities.

Ann Blythe, writing for N.C. Health N, explains that the state legislature passed a CON law "as part of a national effort launched in the mid-20th century to contain health care costs by reducing over-investment in facilities and equipment." In 1973 the N.C. Supreme Court ruled that the CON law then in effect was unconstitutional on the grounds that it violated the emoluments and monopolies clauses of the state's constitution.

Not to be outdone by the courts, the medical industry lobbied the legislature to noodle around with the law which was re-introduced and passed in 1977. Since then the law has undergone several revisions and dodged legislative motions to remove it completely.

The hospital industry has successfully argued the constitutionality of the law, claiming that it improves quality of care particularly in rural and underserved communities.

Contrary to that argument, the University of California College of Law, San Francisco, has observed that though the laws were designed to prevent duplication of services for tax supported hospitals the circumstances have changed, making the laws less beneficial for the public.

"When CONs were initially gaining traction, the fee-for-service (FFS) model was dominant, where hospitals are trying to fill beds and use services to make revenue. In this instance, limiting the number of facilities could be valuable in keeping healthcare spending down. Costs would be kept down by avoiding unnecessary expansion or redundant services." But now with the increase of managed care and advanced payment models, the same CON laws have become anticompetitive, "limiting new market entrants or ways of delivering care more cost effectively."

Blythe notes in her story for N.C. Health News that in spite of Singleton's argument that he can provide "high-quality outpatient eye surgeries consistent with the standard of care" at a more affordable rate than the cost of the using the nearby hospital, the state sees no value in allowing him to perform the surgeries at his facility.

"The State Medical Facilities Plan, which is developed each year as part of the certificate of need process, found no such need existed in Singleton's geographical region, which spans Craven, Jones and Pamlico counties," Blythe writes. "In fact, The Washington Post reported early this year that regulators haven't seen a need for new surgical centers within an 1,800-square-mile area of New Bern since at least 2007. So Singleton had to perform most of his surgeries at the hospital that is just two miles from his clinic."

All of this legal contortion assures the hospital industry of its control of the medical services with hospitals controlling, the "complex, high-cost care- surgery, cancer and infusion therapies" that Lantern claims represents 50% of healthcare spending. These are the very costs that the state's Health Plan is seeking to avoid or mitigate while the taxpayers, who are on the hook for providing the services for the state employees, must themselves pay full freight. Something just doesn't seem to be in balance with this.

If the N.C. Health Plan is feeling the financial pinch caused by anti-competitive medical practices supported by a questionable, arguably unconstitutional law, then it only seems appropriate to fix the problem for all North Carolinians, not just a select group.

The CON law does not need to be argued in court, but rather on the floor of the General Assembly where it originated. If state's elected leaders are truly concerned about the rising cost of health care that their constituents are experiencing in both the private and public sector, they can easily fix the problem. Simply vote to eliminate the law and let private enterprise and competition work for the benefit of everyone in the state.