Press

Certificate of Need may be on the chopping block, again.

Carolina Journal | March 16, 2017

Sen. Ralph Hise doesn’t take no for an answer.

The Mitchell County Republican was close last year but unsuccessful pushing a bill to eliminate the state’s archaic certificate-of-need system, which limits competition in health care through tight restrictions. He vowed to take another whack at the sweeping reform. Last week he introduced Senate Bill 324 to do just that.

“This should end all CON as it exists effective on passage,” said Hise, co-chairman of both the Senate committees on health care, and appropriations for health and human services.

“I definitely have more support for it than I did last year,” Hise said.

In conversations with House counterparts and medical provider stakeholders, “I have yet to find any that tell me the future of health care is government agencies determining the amount of health care services we can receive,” Hise said. Even the state Department of Health and Human Services, which administers CON oversight, has cut 86 CON rules.

But longstanding foes of reform are resisting.

“Oh sure, particularly the hospitals, long-term care facilities, those kind of things. There’s some kind of immediate pushback, but we’ve been down that road before,” said Hise, who was joined by Sen. Trudy Wade, R-Guilford, as a primary sponsor.

One difference with this CON abolition is that it does not set a deadline for the law to end. Hise said he is considering a phased-in schedule letting affected providers and industries have enough time to recoup their investments.

Hise acknowledged entrenched interests would resist full repeal. An alternative scenario could allow more providers to compete in areas now restricted by CON so that eventual repeal is possible. 

Another fallback position might be to exempt select areas, as happened last year when allowing the former Franklin Regional Medical Center in Louisburg to reopen withpsychiatric inpatient beds that didn’t need CON approval.

Two other bills abolishing specific CON laws were introduced last week.

Senate Bill 330 sponsored by Senate Majority Leader Harry Brown, R-Onslow, would exempt hospice inpatient facilities from CON regulations.

Senate Bill 349 sponsored by Sen. Tommy Tucker, R-Union, would exempt ophthalmologists from CON mandates so they could perform some eye surgeries in a surgical procedure room.

The Mercatus Center at George Mason University has done groundbreaking research on the negative effects of CON regulations on health care in North Carolina and other states. One study found higher death rates in several categories. Another found that, without CON laws, states would have more facilities, patient beds, and high-end diagnostic equipment.

Matthew Mitchell, a senior research fellow at Mercatus who has examined CON issues, said those laws restrict supply, “which economic theory tells us, and 40 years of data now confirm, is likely to limit access to care, diminish the quality of care, and increase the price of services.”

Barring newcomers from the health-care market explains why regulated industries tend to prefer CON, Mitchell said. Economists and antitrust authorities in the U.S. Department of Justice and Federal Trade Commission “have had a longstanding position that certificate of need unnecessarily cartelizes industries to the detriment of consumers and taxpayers.”

Mitchell said creating those cartels can help the wealthy and well-connected at the expense of the powerless. 

“I would think both liberals and conservatives could coalesce around that.”

Indeed, Brown’s hospice bill has bipartisan support. Sen. Gladys Robinson, D-Guilford, is one of two Democrats who signed on. The other is Sen. Valerie Foushee, D-Orange. Sens. Bill Cook, R-Beaufort, Norman Sanderson, R-Pamlico, and Louis Pate, R-Wayne, also are co-sponsors.

Robinson said she has worked with hospice-care administrators in Greensboro, and has had friends and constituents who used its services.

“I know that it is important that we have capacity within those facilities, facilities like the one in Greensboro, and across the state so that loved ones can be properly taken care of,” Robinson said. “We should not have a limit on the beds that are available to take care of patients during those latter stages of life.”

But Linton Cooper, vice president of Transitions Life Care (formerly Hospice of Wake County), believes repealing CON regulations for inpatient hospice is bad public policy.

“The utilization of inpatient hospice beds has actually been declining across North Carolina, and that is reflective of the data across the United States,” said Cooper, also board chairman of the Association for Home and Hospice Care of North Carolina.

“Additionally, there is a process to request a CON certain special needs determination, and there are very few people who are asking for additional beds to be placed in their counties, which suggests that people already have excess capacity,” Cooper said.

Additional inpatient hospice bed allocations are available in Cumberland County, yet no applications have been submitted, he said.

“So when you have opportunities to build facilities, and no one is applying for them, that doesn’t suggest that there’s an unmet demand,” Cooper said.

Katherine Restrepo, director of health care policy at the John Locke Foundation, disagrees.

Health-care facilities and medical entrepreneurs, not the state, “should assess on their own terms whether there is in fact a market demand for medical services and facilities they wish to expand or construct to provide health care for patients in their communities,” Restrepo said.  

The state process to allot certificates “is largely outdated and contains loopholes, which create an unequal playing field” for select entities to offer more medical services or build new health care facilities in their local communities, she said.  

Restrepo said CON laws are a way for the status quo to keep out competition. “Who wouldn’t use that to their advantage?” 

Senate budget gives certificate of need the (eventual) ax

 Carolina Journal | May 15, 2017

Hospitals vow to fight rules blocking new medical investments

without government approval

One item in Senate’s $22.9 billion spending plan isn’t budgeted to cost the state a penny, with advocates arguing it will reduce government bureaucracy and improve access to medical services.

Indeed, the former head of the state medical society has estimated that shift — the gradual repeal of certificate-of-need laws for medical providers — would save taxpayers $250 million annually in payments to the State Health Plan for public employees.

But the state’s powerful hospital lobby says it would be harmed by that change and has launched a campaign to keep it out of the final budget. Senate Bill 257, the budget bill, immediately exempts several medical services from CON laws. Those include ambulatory surgery centers, along with outpatient gastrointestinal endoscopies and some outpatient eye surgeries. The remaining CON requirements would be phased out fully by 2025.

The idea behind CON laws is to ensure that the state offers the “right” number of medical providers — neither too many nor too few. Physician practices that want to purchase new high-end equipment or open standalone health-care facilities (such as outpatient surgery centers) must receive permission from state bureaucracies. Existing hospitals and other providers get ample opportunity and clout to oppose potential competition.

Eliminating the CON provisions “will add financial instability to hospitals and health systems across our state already challenged by uncertainty in today’s health-care environment,” the North Carolina Hospital Association said Wednesday in a news release.

But orthopedist Dr. Richard Bruch, former head of the N.C. Medical Society, has said the CON laws force members of North Carolina’s financially embattled State Health Plan to pays a quarter-billion dollars more per year than necessary. In a medical journal article, he wrote that costs are higher for State Health Plan members because the lack of ambulatory surgery centers forces the plan to pay more than needed for routine operations in hospitals rather than outpatient facilities.

Research also shows states with CON laws have higher death rates than those without them.

The hospital association is the most vocal CON supporter. It recently formed a political organization whose mission, in part, is to raise money and back legislative candidates who favor maintaining CON laws.

The association says repealing CON laws neither would reduce costs nor increase access to care. It cited research by Ascendient Healthcare Advisors claiming North Carolina’s net price per inpatient discharge is 15 percent lower than the average of all states without the law, and provider cost per outpatient service is nearly 20 percent lower.

The hospital association state North Carolina residents already have better access to health-care services than states without CON laws. North Carolina has nearly twice as many hospitals and 40 percent more Medicare-certified ambulatory surgery centers per 1,000 square miles.

The hospital association argues in its release that 40 percent of the state’s hospitals are in rural communities with high numbers of uninsured and underinsured patients. They depend on services such as outpatient surgery to offset losses in emergency departments and behavioral health care.

Removing CON protection could put an estimated 2,300 rural jobs at risk in those communities, and reduce health care options, the release said.

Critics of CON laws say the complaints from the hospital association don’t track the experience of other states that have gotten rid of the restrictions.

“We’re not flying blind here. There are 15 states that have repealed CON,” said Matt Mitchell, senior research fellow at the Mercatus Center at George Mason University. Results in those states can be used to test arguments against repealing certificate of need in North Carolina.

While hospitals complain they do not operate in a free market, making it harder for new providers to enter the market is no answer, Mitchell said.

“It’s one of the most well accepted principles in economics that a supply restriction raises prices,” he said, whether it’s limiting a town to one pizza shop or one physician who can perform coronary bypass surgery. If regulations already limit the health-care market, adding other distortions such as CON laws worsen the problem.

After reviewing four decades of research, Mitchell said he has found no evidence CON reduces spending. Nor does he believe it reduces prices per unit of service.

And while hospitals consistently claim rural hospitals would be devastated by CON repeal, Mitchell said rural residents would gain by having ambulatory surgery centers nearby, more choices driven by competition, and greater access to care. They’re being harmed now because CON restrictions force them to travel longer distances to get treatment.

Time to tear down the walls to healthcare

The Hill | August 23, 2016

Politicians looking for a way to break through the stale healthcare debate in Washington are missing something obvious: Republicans -- many of whom still pine for the Reagan Revolution -- need only to finish what their former standard-bearer started. Democrats need only to follow through on a current Obama administration policy. And these two policies are one and the same.

As Salim Furth and Reece Brown have recently explained, nearly 30 years ago President Ronald Reagan convinced Congress to repeal its mandate that states in our union restrict the provisions of healthcare services through certificate-of-need (CON) programs. For the preceding decade, these little-known, yet hugely significant programs required providers to demonstrate that a community "needed" their services before they could open a practice, offer a new line of services, or invest in certain devices or technology.

Repealing the mandate made sense. [...]

Franklin County picks Duke LifePoint to operate its medical center

The News & Observer | October 25, 2016

LOUISBURG -- Franklin County's only hospital has been closed for a year, but it could reopen by next summer, officials said.

The Franklin County Board of Commissioners decided unanimously Monday to accept a proposal from Duke LifePoint to operate a freestanding emergency department and operate beds for mental health patients in the former Franklin Medical Center.

"Our goal is for both the behavioral health service and the emergency department be operational within the first year," said Bert Beard, CEO of the Maria Parham Medical Center in Henderson. [...]

County leaders OK plan that could bring hospital back to Franklin County

WNCN | October 24, 2016

LOUISBURG, N.C. (WNCN) -- A major step forward took place on Monday night in the push to bring hospital services back to Franklin County.

The county's only hospital closed last year, which left the closest emergency room 21 miles further away.

The lack of a hospital in Franklin County is increasing the time of emergency calls from 45 minutes to two to three hours.

A year ago, Novant Health announced it was closing Franklin Medical Center. It gave its 140 employees there and the community just 10 days notice.

But, Monday night county commissioners voted to start negotiations with Duke Lifepoint to take over the old Franklin Medical Center. [...]

 

 

 

 

 

Little-Known State Laws Are Hurting Patients and Making Hospitals Worse

THE FISCAL TIMES | OCTOBER 3, 2016

 

 

 

 

More than five decades have passed since New York state first enacted something called a certificate-of-need law (CON) in an effort to curb rising health care costs. Such laws, now enforced in 35 states and the District of Columbia, require providers to first seek permission from their state’s government before opening a new practice, expanding services and making certain investments in devices and medical technology. In short, they force would-be competitors in the health care sector to get a permission slip to do what they’re trained to do.

It has become increasingly clear that these laws have failed to achieve their goal. And if that isn’t enough reason to be skeptical, we are now beginning to understand the real effect they have on the provision of health care in America. It isn’t pretty: CON laws may be diminishing hospital quality, and even raising death rates in some cases. […]

Certificate-of-Need Laws: Implications for Virginia

 

 

 

February, 2015 | Mercatus Center

Thirty-six states and the District of Columbia currently limit entry or expansion of health care facilities through certificate-of-need (CON) programs. These programs prohibit health care providers from entering new markets or making changes to their existing capacity without first gaining the approval of state regulators. Since 1973, Virginia has been among the states that restrict the supply of health care in this way, with 19 devices and services—including acute hospital beds, magnetic resonance imaging (MRI) scanners, and computed tomography (CT) scanners— requiring a certificate of need from the state before the device may be purchased or the service may be offered. 

CON restrictions are in addition to the standard licensing and training requirements for medical professionals, but are neither designed nor intended to ensure public health or ensure that medical professionals have the necessary qualifications to do their jobs. Instead, CON laws are specifically designed to limit the supply of health care, and are traditionally justified with the claim that they reduce and control health care costs. The theory is that by restricting market entry and expansion, states might reduce overinvestment in facilities and equipment. In addition, many states—including Virginia—justify CON programs as a way to cross-subsidize health care for the poor. Under these “charity care” requirements providers that receive a certificate of need are typically required to increase the amount of care they provide to the poor. In effect, these programs intend to create quid pro quo arrangements: state governments restrict competition, increasing the cost of health care for some, and in return medical providers use these contrived profits to increase the care they provide to the poor.

However, these claimed benefits have failed to materialize as intended. Recent research by Thomas Stratmann and Jacob Russ demonstrates that there is no relationship between CON programs and increased access to health care for the poor. There are, however, serious consequences for continuing to enforce CON regulations. In particular, for Virginia these programs could mean approximately 10,800 fewer hospital beds, 41 fewer hospitals offering MRI services, and 58 fewer hospitals offering CT scans. For those seeking quality health care throughout Virginia, this means less competition and fewer choices, without increased access to care for the poor.

THE RISE OF CON PROGRAMS

CON programs were first adopted by New York in 1964 as a way to strengthen regional health planning programs. Over the following 10 years, 23 other states adopted CON programs. Many of these programs were initiated as “Section 1122” programs, which were federally funded programs providing Medicare and Medicaid reimbursement for certain approved capital expenditures. Virginia enacted its first CON program in 1973. The passage of the National Health Planning and Resources Development Act of 1974, which made certain federal funds contingent on the enactment of CON programs, provided a strong incentive for the remaining states to implement CON programs. In the seven years following this mandate, nearly every state without a CON program took steps to adopt certificate-of-need statutes. By 1982 every state except Louisiana had some form of a CON program.

In 1987, the federal government repealed its CON program mandate when the ineffectiveness of CON regulations as a cost-control measure became clear. Twelve states rapidly followed suit and repealed their certificate-of-need laws in the 1980s. By 2000, Indiana, North Dakota, and Pennsylvania had also repealed their CON programs. Since 2000, Wisconsin has been the only state to repeal its program 

Virginia remains among the 36 states, along with the District of Columbia, that continue to limit entry and expansion within their respective health care markets through certificates of need. On average, states with CON programs regulate 14 different services, devices, and procedures. Virginia’s CON program currently regulates 19 different services, devices, and procedures, which is more than the national average 

DO CON PROGRAMS CONTROL COSTS AND INCREASE THE POOR’S ACCESS TO CARE?

Many early studies of CON programs found that these programs fail to reduce investment by hospitals. These early studies also found that the programs fail to control costs. Such findings contributed to the federal repeal of CON requirements. More recently, research into the effectiveness of remaining CON programs as a cost-control measure has been mixed. While some studies find that CON regulations may have some limited cost-control effect, others find that strict CON programs may in fact increase costs by 5 percent. The latter finding is not surprising, given that CON programs restrict competition and reduce the available supply of regulated services 

While there is little evidence to support the claim that certificates of need are an effective cost-control measure, many states continue to justify these programs using the rationale that they increase the provision of health care for the poor. To achieve this, 14 states—including Virginia—include some requirement for charity care within their respective CON programs. This is what economists have come to refer to as a “cross subsidy.”

 The theory behind cross-subsidization through these programs is straightforward. By limiting the number of providers that can enter a particular practice and by limiting the expansion of incumbent providers, CON regulations effectively give a limited monopoly privilege to providers that receive approval in the form of a certificate of need. Approved providers are therefore able to charge higher prices than would be possible under truly competitive conditions. As a result, it is hoped that providers will use their enhanced profits to cover the losses from providing otherwise unprofitable, uncompensated care to the poor. In effect, those who can pay are charged higher prices to subsidize those who cannot.

In reality, however, this cross-subsidization is not occurring. While early studies found some evidence of cross-subsidization among hospitals and nursing homes, the more recent academic literature does not show evidence of this cross-subsidy taking place 

The most comprehensive empirical study to date, conducted by Thomas Stratmann and Jacob Russ, finds no relationship between certificates of need and the level of charity care.

THE LASTING EFFECTS OF VIRGINIA’S CON PROGRAM

While certificates of need are neither controlling costs nor increasing charity care, they continue to have lasting effects on the provision of health care services both in Virginia and in the other states that continue to enforce them. However, these effects have largely come in the form of decreased availability of services and lower hospital capacity.

In particular, Stratmann and Russ present several striking findings regarding the provision of health care in states implementing CON programs. First, CON programs are correlated with fewer hospital beds. Throughout the United States there are approximately 362 beds per 100,000 persons. However, in states such as Virginia that regulate acute hospital beds through their CON programs, Stratmann and Russ find 131 fewer beds per 100,000 persons. In the case of Virginia, with its population of approximately 8.26 million, this could mean about 10,800 fewer hospital beds throughout the state as a result of its CON program.

Moreover, several basic health care services that are used for a variety of purposes are limited because of Virginia’s CON program. Across the United States, an average of six hospitals per 500,000 persons offer MRI services. In states such as Virginia that regulate the number of hospitals with MRI machines, the number of hospitals that offer MRIs is reduced by 2.5 per 500,000 persons.18 This could mean 41 fewer hospitals offering MRI services throughout Virginia. The state’s CON program also affects the availability of CT services. While an average of nine hospitals per 500,000 persons offer CT scans, CON regulations are associated with a 37 percent decrease in these services. For Virginia, this could mean about 58 fewer hospitals offering CT scans.

CONCLUSION

While CON programs were intended to limit the supply of health care services within a state, proponents claim that the limits were necessary to either control costs or increase the amount of charity care being provided. However, 40 years of evidence demonstrate that these programs do not achieve their intended outcomes, but rather decrease the supply and availability of health care services by limiting entry and competition. For policymakers in Virginia, this situation presents an opportunity to reverse course and open the market for greater entry, more competition, and ultimately more options for those seeking care.

Christopher Koopman and Thomas Stratmann

Health care providers debate 'certificate of need' law

October 2, 2015 | WECT

Some say a decades-old state law intended to contain health care costs and ensure access actually stifles competition and limits patient choice.

The Certificate of Need (CON) law prevents health care providers, in most cases, from offering new services or building, replacing or adding to their facilities without getting state approval first.

“The fundamental premise of the CON law is that increasing health care costs may be controlled by governmental restrictions on the unnecessary duplication of medical facilities,” according to the Department of Health and Human Services, the agency that administers the law.

Hospitals, psychiatric facilities, nursing homes, home health agencies and ambulatory surgical facilities are among the facilities that must obtain a CON.

OrthoWilmington was one of three local entities that competed for permission to purchase an MRI machine. The orthopedic practice eventually won the certificate of need after a lengthy and costly appeals process.

“It was unnecessary,” said Dr. Shawn Hocker of OrthoWilmington. “It’s just a political delay that you have to meet all these bullets that have zero medical merit.”

Hocker argues the state law favors providers – often hospitals – that already have certificates of needs.

“The incumbents will always be able to keep any competition or other people out of that marketplace,” Hocker said. “It’s essentially the fox guarding the hen house.”

New Hanover Regional Medical Center supports the CON law because it encourages hospitals to provide access to low-income and geographically isolated patients who otherwise would not receive health care.

“We have to provide services for everyone regardless of ability to pay,” said Scott Whisnant, NHRMC community relations administrator. “An awful lot of hospital services are not profitable. In fact, the majority of them are not profitable. But community hospitals need to provide those services. The community needs them.”

Whisnant said 70 percent of NHRMC patients either can’t pay or have health coverage from the government, which reimburses the hospital less than it costs to provide care.

“Hospitals do have a monopoly if you will on low-income patients, and they have a monopoly on staying open 24-7 and operating emergency rooms that are open at any time for any patient who may have problems elsewhere in the community and can’t get up with their provider,” Whisnant said.

But Hocker noted the hospital finished the 2014 budget year with a $53.5 million surplus.

“So, it’s not like they’re running in the red, he said. ”They have a tremendous financial boom.”

Whisnant explained NHRMC used the surplus to expand its operations and grow its reserves. He said the hospital’s finances were unusually good last year and don’t justify eliminating certificate of need when many hospitals across the state continue to struggle financially.

A law passed this year exempts recently closed medical facilities from certificate of need review.

Certificate of need opponents had some success in the General Assembly this year. A new law will allow some recently closed medical facilities to reopen without a certificate of need. But bills that would have created broader exemptions and even repealed certificate of need didn’t make it out of committee.

“Eventually you’re not going to be able to kick this can down the road because the voters will eventually start speaking if they have to pay twice as much to have a procedure at a hospital and they’re forced to do that because of limitation of choice,” Hocker explained.

Whisnant said the local legislative delegation has largely supported the hospital’s position because they understand that NHRMC provides services that private groups won’t.

“Hospitals have been built around this law for 40 years,” Whisnant said. “They can’t undo that overnight. This is the system that we’ve been asked to comply with, and it’s worked very well for the state.”

Two public hearings are scheduled in October to get input on certificate of need applications in southeastern North Carolina. Porters Neck Imaging and Wilmington Health are competing for the right to buy an MRI scanner. Five applicants are vying for permission to open an adult care home in Brunswick County.

Consumer Choice Between Hospital-Based and Freestanding Facilities for Arthroscopy

September 16, 2015 | The Journal of Bone and Joint Surgery

Abstract

Background: Hospital-based outpatient departments traditionally charge higher prices for ambulatory procedures, compared with freestanding surgery centers. Under emerging reference-based benefit designs, insurers establish a contribution limit that they will pay, requiring the patient to pay the difference between that contribution limit and the actual price charged by the facility. The purpose of this study was to evaluate the impact of reference-based benefits on consumer choices, facility prices, employer spending, and surgical outcomes for orthopaedic procedures performed at ambulatory surgery centers.

Methods: We obtained data on 3962 patients covered by the California Public Employees’ Retirement System (CalPERS) who underwent arthroscopy of the knee or shoulder in the three years prior to the implementation of reference-based benefits in January 2012 and on 2505 patients covered by CalPERS who underwent arthroscopy in the two years after implementation. Control group data were obtained on 57,791 patients who underwent arthroscopy and were not subject to reference-based benefits. The impact of reference-based benefits on consumer choices between hospital-based and freestanding facilities, facility prices, employer spending, and surgical complications was assessed with use of difference-in-differences multivariable regressions to adjust for patient demographic characteristics, comorbidities, and geographic location.

Results: By the second year of the program, the shift to reference-based benefits was associated with an increase in the utilization of freestanding ambulatory surgery centers by 14.3 percentage points (95% confidence interval, 8.1 to 20.5 percentage points) for knee arthroscopy and by 9.9 percentage points (95% confidence interval, 3.2 to 16.7 percentage points) for shoulder arthroscopy and a corresponding decrease in the use of hospital-based facilities. The mean price paid by CalPERS fell by 17.6% (95% confidence interval, −24.9% to −9.6%) for knee procedures and by 17.0% (95% confidence interval, −29.3% to −2.5%) for shoulder procedures. The shift to reference-based benefits was not associated with a change in the rate of surgical complications. In the first two years after the implementation of reference-based benefits, CalPERS saved $2.3 million (13%) on these two orthopaedic procedures.

Conclusions: Reference-based benefits increase consumer sensitivity to price differences between freestanding and hospital-based surgical facilities.

Clinical Relevance: This study shows that the implementation of reference-based benefits does not result in a significant increase in measured complication rates for those subject to reference-based benefits.

Footnotes

Investigation performed at the University of California, Berkeley, California

A commentary by Kern Singh, MD, and Junyoung Ahn, BS, is linked to the online version of this article at jbjs.org.

Disclosure: One or more of the authors received payments or services, either directly or indirectly (i.e., via his or her institution), from a third party in support of an aspect of this work. In addition, one or more of the authors, or his or her institution, has had a financial relationship, in the thirty-six months prior to submission of this work, with an entity in the biomedical arena that could be perceived to influence or have the potential to influence what is written in this work. No author has had any other relationships, or has engaged in any other activities, that could be perceived to influence or have the potential to influence what is written in this work. The complete Disclosures of Potential Conflicts of Interest submitted by authors are always provided with the online version of the article.

Disclaimer: The content is solely the responsibility of the authors and does not necessarily represent the official views of the Agency for Healthcare Research and Quality (AHRQ). California Public Employees’ Retirement System (CalPERS) and AHRQ played no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.

Copyright © 2015 by The Journal of Bone and Joint Surgery, Incorporated

Bill Easing Rules Could Aid Struggling Rural Hospitals

September 23, 2015 | Carolina Journal

Hospitals in Beaufort and Yadkin counties could avoid reopening application process

RALEIGH — Two rural hospitals could be reopened under state legislation that includes the first substantive reform of North Carolina’s certificate of need regulation.

Pungo District Hospital in Belhaven could be the first beneficiary of the legislative change to the state CON law contained in an amended version of House Bill 20, which awaits a final vote in the House. Yadkin Valley Community Hospital in Yadkinville stands to benefit from a separate provision in the bill.

Announcing the amended version of H.B. 20 at a Sept. 23 press conference organized by Belhaven Mayor Adam O’Neal, Sen. Bill Cook, R-Beaufort, said CON laws harm rural hospitals.

A certificate of need basically amounts to a government grant of permission to operate and purchase various health care facilities and equipment. According to a study by the Mercatus Center at George Mason University, only three other states have CON laws more restrictive than North Carolina’s. 

The amendment would “reduce the overly burdensome regulation required of financially challenged rural hospitals. It will allow small rural hospitals more easily to change management with less disruption of health care in their communities,” Cook said.

Existing hospitals can forgo the lengthy certificate of need review when changing hands. That exemption would expand to include hospitals that have closed, so long as the state Division of Health Regulation receives written notice that the hospital would reopen within 36 months.

State Rep. Garland Pierce, D-Scotland, representing the Legislative Black Caucus, and House Minority Leader Larry Hall, D-Durham, spoke at the rally in favor of the measure.

“You know that the system is broke when we as elected officials and citizens have to petition our government in this manner to get something that we are entitled to in any free economy,” said Beaufort County Commissioner Hood Richardson. 

“The system is run on money right now, and the system in North Carolina is concentrating money into mega-hospitals” when it should allow free-market competition in the health care arena, Richardson said. “The certificate of need law is a protection racket for the big boys.”

Connie Wilson, a lobbyist working for CON reform to allow orthopedic and ophthalmology ambulatory surgery centers to open, said H.B. 20 is a small bite of the apple.

“But it’s an important bite because for years the large hospitals have been hiding behind the skirts of the rural hospitals, saying, ‘You’re going to hurt the rural hospitals if you change CON.’ Now we have one example that shows where CON really does hurt rural hospitals, and we’ve been saying that for years,” Wilson said.

Vidant Health took over management of Pungo, the investor-owned hospital serving Beaufort and Hyde counties, two of the state’s geographically largest and poorest, in 2011. It closed the facility in July 2014. 

“Vidant Health believes that a new facility, which delivers a new ambulatory model of care, is the best path forward for the health care needs in the Belhaven area,” said spokeswoman Christine Mackey. 

“Continuing to operate an out-of-date facility under a traditional inpatient model of care is not a sustainable model of health care for the broader community. Our board reached this conclusion more than two years ago, and Vidant Health worked with the mayor and the town during mediation to assist them in taking over the hospital, yet they did not take the steps necessary to do so,” Mackey said. 

Vidant broke ground in April on a new 12,000-square-foot, multispecialty health facility scheduled to open next summer. 

Shalanda Satterthwaite, 27, of Belhaven, wants Pungo District Hospital to reopen. She credits it for saving her life from a stroke when she was 4 years old. 

“I would be dead” if the Belhaven hospital were not open then, she said. Her mother, who suffers various medical ailments, now must drive a long distance for hospital care.

Billie Mackey, a senior citizen, attended Wednesday’s rally in a wheelchair. She said she and her friends in Belhaven have been affected by the hospital closure.

“Several of them had to be transported all the way into Washington to get emergency care,” she said. “If I had a medical emergency, I would have to depend on a helicopter or an ambulance to get me to a medical center, and the first hour is the critical one.” 

Dr. Charles Boyette, a family practice physician in Belhaven for 50 years who covered the hospital’s emergency room by himself for more than three decades, said without the hospital doctors no longer can evaluate, diagnose, treat, stabilize, admit, or transfer a patient. 

“We are losing a lot of patients in increase in morbidity as well as mortality by not having accessibility to an acute care type of hospital which can handle emergencies that we used to handle,” Boyette said. 

“We’re turning into one big transport unit and not being capable of handling the people who have real medical emergencies,” he said. People are experiencing increased and prolonged illnesses that could be treated early at the hospital, which cut down recovery time significantly. 

H.B. 20 includes a provision outside of CON law that would assist Yadkin County in finding a new management group to operate the county-owned hospital. HMC-CAH Consolidated Inc. of Missouri closed the hospital in late May without warning, Yadkin County Manager Lisa Hughes said.

The county solicited contract offers from management companies, Hughes said, but there was concern whether the law required the county to reopen its request-for-proposal process every time a negotiation fell through.

“This is every bit as cumbersome as the certificate of need,” said Sen. Joyce Krawiec, R-Forsyth. “It can take years if you have to start over every single time.” 

Her bill clarifies statutory language to avoid that scenario, Krawiec said.

As for the CON law, “I think it should be repealed completely,” she said.

“I think it’s just a matter of time until the certificate of need is gone, so folks need to start preparing for that.” Krawiec said.

Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.

Duke Health posts highest operating income in years

September 29, 2015 | Triangle Business Journal

The Duke University Health System has posted its best financial operating performance in at least five years.

No one item stands out as a major contributor to the better performance, though the health system’s adult occupancy rate increased by four percentage points to 82 percent last year, and the average length of stay for adult patients increased to 6.8 days from 6.6 days in 2014. That means the health system stayed fuller, on average, than it did in the previous year.

"Duke is benefitting from major investments in facility and information technology investments after years of slow growth due to capacity constraints," according to a statement released by a DUHS spokesman. "Results have also been enhanced by major cost reduction efforts undertaken to allow for lower levels of reimbursement expected in the future."

Duke’s fiscal year ended June 30. The financial results were unaudited; final figures will be available later in the year.

Read: How Triangle hospitals stack up on readmission penalties

The bulk of the operating income comes from Duke University Hospitals, what hospital workers often refer to as “Big Duke.” The main hospital in Durham generated $262 million of operating income and and $2.1 billion of net patient service revenue.

Read: Duke Health and WakeMed form partnership

In looking at margins, however, Duke Raleigh leads the way. The hospital just outside the beltline off Wake Forest Road brought in $60 million of operating income off $370 million of patient revenue, a 16 percent margin.

In terms of payer mix, not much changed. Medicare and managed care plans increased slightly to 41 percent and 39 percent, respectively, with the difference being offset by a decrease in Medicaid receipts, which decreased slightly to 12 percent last year.

 

The performance pushes DUHS’s total assets to more than $5 billion.

Below are Duke University Health System financial results by year (2015 figures are unaudited)

Net service revenue

2011: $2.14 billion

2012: $2.41 billion

2013: $2.46 billion

2014: $2.52 billion

2015: $2.95 billion

Operating income (operating margin)

2011: $189 million (8.8%)

2012: $256 million (10.6%)

2013: $184 million (7.5%)

2014: $96 million (3.8%)

2015: $355 million (12.0%)

Net income (includes non-operating gains)

2011: $542 million

2012: $173 million

2013: $440 million

2014: $483 million

2015: $408 million

Jason deBruyn covers the biopharmaceutical and health care industries. Follow him on Twitter @TriBizHealth or @jasondebruyn.

Charlotte area among highest for some medical costs, survey shows

October 6, 2015 | Charlotte Observer

Charlotte ranks in the top four of 30 U.S. cities for the price consumers pay for four common medical procedures, according to the 2015 Castlight Health Costliest Cities Index.

For the second year, Castlight, a health care management organization based in San Francisco, produced the index based on private insurance claims and public data showing what employers and consumers actually pay for common procedures in 30 U.S. cities, including Charlotte and Raleigh.

According to Castlight, the Charlotte area, including Gastonia and Rock Hill, was the second most expensive city for CT scans and MRIs, the third most expensive for OB/GYN visits, and the fourth most expensive for preventive exams for women.

Prices for eight common medical procedures varied widely, not only across the country but within cities. For example, in Washington, D.C., the cost for a CT scan of the head or brain ranged from $78 to $1,673. The average price was $592, which still made Washington one of the lowest-cost cities.

In the Charlotte area, consumers pay from $1,048 to $1,509 for the same CT scan, making it the second most expensive city next to Indianapolis, according to Castlight. In the past year, the price for this CT scan in the Charlotte area increased by 114 percent, to an average of $1,325.

Castlight said the variations within cities and between cities occurs because, “unlike virtually every other product and service, no one knows how much health care costs until days or weeks after they purchase it.” 

“The lack of transparency into prices is a major reason why employees and employers end up needlessly and unknowingly overpaying for treatments and procedures,” according to Castlight. “. …Study after study has shown there is no correlation between price and quality in healthcare. Only by exposing these wild fluctuations can we begin to rein in these costs.”

Charlotte also ranked second among the 30 cities for the cost of an MRI of the lower back, which ranged from $1,570 to $2,363. The average cost was $1,985, a 9 percent increase over last year, Castlight found.

Charlotte ranked third most expensive for OB/GYN follow-up visits, with prices ranging from $62 to $129. For preventive gynecological exams, Charlotte-area prices ranged from $108 to $250, making it the fourth most expensive city in the Castlight list. Charlotte also ranked as the sixth most expensive for preventive primary care visits, which ranged from $110 to $250.

For two other procedures, the Charlotte area had among the lowest prices. The cost of the human papillomavirus test, also called the Pap test, to detect cervical cancer averaged $32, the lowest price of all 30 cities surveyed. The cost for a mammogram in the Charlotte area ranged from $158 to $220. Nationwide, mammograms cost anywhere from $50 in Dallas to $1,898 in New York City.

In reaction to the lack of transparency in health care costs, government agencies, advocacy groups and insurance companies have in recent years begun to provide more cost data to consumers. The federal government’s website – www.hospitalcompare.hhs.gov – lists how much Medicare pays for common procedures. For their members only, Aetna insurance and Blue Cross and Blue Shield of North Carolina also provide cost comparisons for procedures at specific hospitals. Tools on their websites can also calculate estimated out-of-pocket costs for members.

Karen Garloch: 704-358-5078, @kgarloch

Don't reform Certificate of Need (CON), repeal it

Forbes.com | September 28, 2015

by Katherine Restrepo, John Locke Foundation

As I write and you read, legislators have allegedly made final closed-door agreements on Certificate of Need (CON) reform — a law in which statists protect established health care facilities and hospitals from competition.

According to Dr. Bob Graboyes of the Mercatus Center, CON fits well with his “fortress vs. frontier” motto. My colleague John Hood refers to CON as not a certificate of need but rather a certificate of greed, or a COG.

North Carolina has in some cases successfully moved the needle on CON in recent years. You can read more about that here. Other reforms made to the law, however, have their flaws.

One example is to a five-year pilot project beginning in 2010 in which the Division of Health Service Regulation (DHSR) issued a special ‘need determination’ for three single-specialty ambulatory surgery centers (ASCs) in the Charlotte, Triad, and Triangle regions. Despite ASCs having already proven to save Medicare an average annual $2.5 billion, operate efficiently, and receive high patient satisfaction scores since the mid 1980s, the state perceived this pilot project to be “innovative” in the year 2010. I’d like to think that this decision was a late wake-up call for North Carolina central planners that patients can access health care in lower cost settings, but I’m more inclined to conclude that the pilot was another delay tactic for future legislation granting ASCs full exemption from CON review. Regardless, innovative care delivery stalled since applicants were still thrown into the lagging approval process. It wasn’t until almost four years and roughly $345,000 in application and legal fees later that OrthoCarolina was able to break ground due to Carolinas HealthCare System and Charlotte Eye Ear Nose & Throat Associates (CEENTA) appealing its initial CON award.

Another example relates to language rolled into the 2013 budget exempting hospitals and other facilities such as nursing and adult care homes from state oversight when undergoing capital improvements or updating major medical equipment exceeding $2 million. The problem here is that these changes only benefit “existing facilities” — two words in the statutory text that distinguish the CON haves from the have-nots.

The “existing facilities” language causes all sorts of problems. A rural hospital that closed last year in Belhaven, North Carolina had plans to reopen, yet was still subject to market entry barriers because it was no longer actively operating. After obtaining the necessary funds to reopen a scaled-down hospital, the state still denied the application. Advocates of reopening argue that Belhaven is in serious need of an Emergency Department, as the nearest one is 35 miles away.

Ending North Carolina's health care CON laws

August 11, 2015 | Charlotte Observer

Who do you think should decide what medical treatments are available throughout the state – you and your doctors or state bureaucrats?

Unfortunately for North Carolinians, it’s currently the latter. This is thanks to the state’s outdated “Certificate of Need” laws. A patchwork of onerous laws and regulations, they require medical providers to obtain the state’s permission before adding new equipment, offering new services or opening new facilities. This places a tremendous burden on entrepreneurial-minded physicians who want to provide more care for more patients.

Read more

Belhaven Mayor Adam O'Neal speaking in support of CON Reform

Belhaven Mayor Adam O’Neal speaking in support of CON reform; addressing how CON laws are hurting rural healthcare

One of the arguments the big hospital systems use to support their continued need for current CON regulations is that changing those laws would hurt rural healthcare, especially their emergency needs. Belhaven Mayor Adam O’Neal tells how the closing of Belhaven’s hospital has negatively impacted his community and the Pamlico River region, but also how North Carolina’s antiquated CON laws have been a roadblock to reopening a healthcare facility in eastern Beaufort County.

Read more