North Carolina Patients Suffer under “Certificate of Greed”

October 1, 2019
By Christina Sandefur

Dr. Gajendra Singh has a goal: to deliver quality healthcare services at lower costs to his patients. That’s why he founded Forsyth Imaging Center in Winston-Salem, North Carolina, in 2017—to provide medical imaging services like x-rays, ultrasounds, and MRI scans at a fraction of the prices charged by hospitals and other competitors. But under North Carolina’s certificate of need (CON) law, licensed healthcare providers like Dr. Singh are prohibited from offering any “new institutional health service” without permission from the state.

Because existing providers already own MRI machines, the state decided a new MRI scanner wasn’t needed in Forsyth County, where Dr. Singh’s business is located. So Dr. Singh is barred by state law from purchasing this critical diagnostic equipment for his practice—not because this would harm public health or because he is unqualified or incompetent, but solely to prevent legitimate economic competition against existing providers.

On behalf of Dr. Singh, our friends at the Institute for Justice have filed a lawsuit challenging North Carolina’s CON law as a violation of the state Constitution’s Anti-Monopoly Clause, which says, “Perpetuities and monopolies are contrary to the genius of a free state and shall not be allowed.” Yesterday, along with North Carolina attorney Ellis Boyle, we filed a brief in support of Dr. Singh. We argue that through anticompetitive restrictions on the right to purchase medical equipment and offer medical services, North Carolina’s CON law creates just what is prohibited: a monopoly for existing providers against competitors seeking to offer better and more affordable healthcare services.

Numerous courts have observed that CON laws are inherently anticompetitive. Indeed, North Carolina’s first CON law, enacted in 1971, was struck down by the North Carolina Supreme Court for violating the anti-monopoly clause. Yet five years later, the state enacted another CON law in order to take advantage of federal subsidies. That law remains on the books today, despite the fact that the federal government long ago abandoned its support for CON laws because their primary beneficiaries are not patients, but entrenched special interests—existing medical providers in communities—who use the system to protect themselves from competition.

Academic studies back these findings. An exhaustive study published in 2016 by the Mercatus Center at George Mason University found that in states with CON laws, the cost of healthcare is higher, the quality is lower, and access is scarcer. Even the American Medical Association has concluded that CON laws “have failed to achieve their intended goal of containing costs,” restrict patient choice, and do nothing to improve the quality of healthcare.

As Goldwater Institute National Investigative Journalist Mark Flatten revealed in an in-depth report, CON laws protect entrenched businesses at the expense of applicants—and public health. Using examples from Iowa, Oregon, and Tennessee, Flatten shows how entrenched interests have been able to block the construction of new treatment facilities, even in the face of demonstrated need. (To learn more about the dire situation in Iowa, check out this new video from the Goldwater Institute.)

As Americans struggle with rising healthcare costs, the time is right for courts to enforce state constitutions to stop politically well-connected businesses from blocking the competition that lowers prices and improves services in every other area of the economy. Dr. Singh should have the freedom to run his practice in the way that best serves his community—without having to essentially get his own competitors’ permission to offer better, less expensive care.

Christina Sandefur is the Executive Vice President at the Goldwater Institute.