Hospitals Should Battle In The Marketplace, Not The Courtroom

By David Larson
Carolina Journal

Two weeks ago, there was a nice groundbreaking ceremony with a lot of smiling faces. Gov. Josh Stein traveled all the way out to the mountains to celebrate AdventHealth’s Weaverville hospital, now officially under construction. But before the handshakes and pats on the backs, AdventHealth had to fight for four years in court after their initial 2022 approval because their competitors didn’t like the idea of… well, competing with them.

And our state’s CON process, which forces health providers to convince a government panel that there is a need for the service they want to provide, allows rivals exactly this power to appeal over and over, delaying and often blocking other providers from entering the area. In this case, HCA/Mission, who has a near monopoly in much of North Carolina’s mountains, put AdventHealth through years of appeals before finally the NC Supreme Court affirmed the original decision to allow them to build the 67-bed facility in Weaverville.

But AdventHealth also wants to build other health care facilities in the mountains. Victoria Dunkle, a spokesperson for AdventHealth, told CJ that one of these projects, adding 26 other beds to the Weaverville facility, was also held up by HCA/Mission appeals but that there would be a decision soon.

In addition to the 67 approved beds and the 26 beds in limbo, AdventHealth was just denied a 129-bed CON “to provide a new choice for tertiary care including trauma, advanced cancer and cardiac care and a Level II NICU at AdventHealth Weaverville.”

In response to the decision, AdventHealth provided a statement to CJ:

AdventHealth’s commitment to serving Western North Carolina remains unchanged… Based on the recent health care access and quality concerns in our region, we do not believe the decision is in the best interest of our community and will have profound impacts. We are currently evaluating appeal options that honor the community’s needs and voice.

You’d think AdventHealth would be really opposed to CON laws, considering all of this hassle and the years of appeals. But Asheville’s Mountain Xpress newspaper quoted Graham Fields, assistant to the president at AdventHealth, after a tense exchange with Mission Hospital CEO Greg Lowe, saying that CON is “necessary to protect rural areas” and is “a necessary safeguard.”

Even more ironically, Lowe, whose Mission Hospitals are using CON to block AdventHealth, Novant, and UNC Health, disagreed, saying, “We work in states across the country where CON is in place and states that have no CON in place, and we do perfectly fine in either one of them. If CON was to go away, in North Carolina, you would immediately see a new patient tower on Mission Hospital’s campus to accommodate the need that patients have for high-end services. The only thing that’s been holding us back from investing hundreds of millions of dollars of expansion is the CON process.”

Both quotes are enough to make your jaw drop. AdventHealth, after getting denied for CONs and fighting endless battles, sees it as necessary. And Mission, who cynically uses CON to avoid competition, says they could take it or leave it, since they do fine in non-CON states — and, actually, it’s stopping us from just adding a whole new wing to our hospital.

State Sen. Benton Sawrey, R-Johnston, spoke recently at the John Locke Foundation’s Carolina Leadership Conference, where he said, “I think everybody here is aware that we have some of the highest health care premiums in the nation because we don’t really know what’s going on behind the curtain of the health care system.”

Sawrey, who was the primary sponsor of SB 370, a bill to eliminate CON entirely in the state, pinpointed CON as the single biggest thing North Carolina can do to lower health care costs and called the state the worst in the nation in terms of CON.

He said it was “one of the last vestiges of centralized planning that you see in communist nations that exists in North Carolina” and that “We have a system in place where you want to open a new facility offering a new service and you have to go to submit an application to a centralized planning committee that nobody knows who is on it.”

But, despite the state Senate passing the repeal bill and then adding it to their budget, the House refused to take it up. The main reason this archaic system remains is the North Carolina Healthcare Association (formerly the NC Hospital Association). Whenever a CON repeal comes up, they ramp up their lobbying efforts to 11.

On the NCHA website, they are extremely clear about why they do not want to let this power go:

Hospitals and health systems depend on the state’s Certificate of Need law to enable them to provide essential services to their communities. As the safety net providers in their communities, hospitals and health systems use the funds earned in excess of cost in one service line to cover charity care and bad debt expenses for which they are not reimbursed. Those funds also support other services, like emergency care, that are reimbursed at less than cost to preserve access to care for everyone in their communities.

Notice the line: “hospitals and health systems use the funds earned in excess of the cost in one service line to cover charity care and bad debt expenses for which they are not reimbursed.”

Basically, we need non-competitive control of certain services so we can jack up the prices and make up for losses elsewhere. Are there issues with Medicaid reimbursement rates hurting hospital bottom lines? Sure. But these costs should be out in the open so they can be dealt with honestly, not hidden behind monopoly schemes that reduce overall supply and increase costs of health care in the state.

And if hospitals experience losses in certain areas due to Medicaid, so will their competitors. They can both raise prices elsewhere to cover them if need be. Then they can battle each other in the marketplace for who can provide these services best and most affordably, rather than battling in front of government panels and judges.

David Larson is managing editor of Carolina Journal.