Opinion: Hospital Expansion Numbers Expose CON’s Flaws

By Mitch Kokai

Afast-growing area like Wake County should welcome the addition of 70 hospital beds and four operating rooms. Yet recent publicity about the healthcare infrastructure expansion raises significant questions.

Those questions should prompt North Carolinians to evaluate why state government blocks growth in healthcare supply.

The Raleigh News and Observer’s Feb. 20 headline warned: “NC regulators approve new hospital beds but no new hospitals for Wake County.”

The region’s three major hospital systems — Duke, UNC, and WakeMed — and “one aspiring newcomer,” Novant Health of Winston-Salem, filed applications with the state to add 246 new hospital beds and 13 operating rooms in Wake County, according to Richard Stradling’s N&O report.

The requests included a new 50-bed hospital for Wake Forest, a 12-bed hospital for Garner, and a 36-bed hospital for Knightdale.

Yet regulators with the North Carolina Department of Health and Human Services approved fewer than 30% of the proposed beds and operating rooms. Expansion will be confined to existing hospitals in Raleigh and Cary.

DHHS regulators “determined that Wake County needs only 70 additional acute care beds and four operating rooms by 2026,” Stradling reported. The government made that decision through its “certificate of need process.” The CON is basically a government permission slip allowing healthcare providers to build new facilities, expand existing operations, and add high-dollar medical equipment.

CON “aims to prevent hospitals from building unnecessary facilities that drive up health care costs or hurt quality, and approves only what it thinks the market can support,” the N&O article explained.

Stradling accurately reported the reasons government officials offered to justify CON and their decisions about Wake County’s near-term needs. But the article ought to nudge readers to think a bit more about the impact of regulators’ decisions.

For one thing, it’s hard to imagine how adding 70 hospital beds would be better for healthcare costs in Wake County than adding 246. Basic economic concepts of supply and demand suggest the exact opposite result.

Nor does the DHHS decision appear to account for easy access to services. More hospital beds in Raleigh and Cary might open up more space for patients driving in from Wake Forest, Garner, and Knightdale. Those new beds are unlikely to have as much positive impact on healthcare access as new hospitals in patients’ home communities.

Regulators also treated competing providers differently. WakeMed secured 45 of the new beds, with UNC gaining 20 and Duke five. Government shot down Novant’s plan to offer a fourth major option for Wake County patients.

“Novant has tried to break into the Wake County market before, with two applications to build a hospital in Holly Springs in 2008 and 2011,” Stradling reported. “Both were denied, and the company filed an appeal in court when in 2012 UNC Rex received approval to build a 50-bed hospital there.”

Novant abandoned the court fight two years later. The UNC Rex hospital eventually opened in 2021.

As Novant indicated plans to try again to win state approval for a Wake County hospital, Duke told the N&O it is “considering all options, including appeal” as it deals with approval of just five of the 70 beds it sought from government regulators.

Appeals are common in the CON process. Competitors often spend years in court battling for government permission to expand services. In the meantime, patients must wait for the legal fights to conclude before they see benefits of a new or expanded healthcare facility.

One New Bern eye surgeon continues to battle the entire CON structure. Working with the Institute for Justice, Dr. Jay Singleton is fighting state CON restrictions on his business. Without a CON, he cannot perform most eye surgeries at his Singleton Vision Center. He must send his patients instead to a nearby hospital. The price tag for a cataract surgery triples.

The North Carolina Supreme Court recently revived Singleton’s legal battle, but that decision basically sent the eye surgeon back to the starting line. He still must prove to a trial judge that CON requirements violate his state constitutional rights, including the right to earn a living.

Some state legislators have expressed openness to killing the CON process completely. Others would settle for a law blocking health care providers from a collecting a certificate and holding it for years with no action.

Without the mandatory government permission slip, providers could respond more quickly to market demands for new facilities and services.

Wake County’s recent news should open more eyes about the state’s questionable CON game.

Mitch Kokai is senior political analyst for the John Locke Foundation.