The battle to allow for more competition in the health care market wages on between the Davids and Goliaths of the North Carolina health care industry. A few weeks ago, the NC House Health Committee meeting featured a debate between the Hospital Association’s deputy general counsel and a lobbyist representing the North Carolina Orthopaedic Association. Both parties made their case as to why the state’s excessively bureaucratic Certificate of Need (CON) law – a law where providers must first seek a permission slip from the state, and then their competitors, to develop or expand an existing health facility – should remain intact or be stripped from the books.

Among the proposed items in pending House legislation that would no longer need CON approval, the most contentious provision pertains to multi-specialty ambulatory surgery centers (ASCs). Will more provider-led ASCs lead to patient cherry picking, thereby compromising patient access to care?

Hospitals like to use the patient cherry picking argument a lot: for-profit surgery centers pick off healthier patients or private coverage patients, leaving hospitals with either more complex or revenue losing cases where costs of care exceed government payer reimbursement.

Sure, cherry picking may happen. But is it considered cherry picking when hospital systems buy out physician practices or engage in mergers to remain financially sound? While this trend is not new, Mission Health, a sprawling hospital system located in western North Carolina, has been making media waves with its physician group purchasing spree. Under the graces of Certificate of Public Advantage (COPA), Mission has the ability to be a monopoly and remain immune from any intervention by the Federal Trade Commission (FTC) so long as the state exercises regulatory oversight. Such criteria include a margin cap along with cost caps limited to inpatient and outpatient services.

Naturally, humans find ways around rules. A 2011 economic analysis prepared by Charles River Associates in Washington, D.C., highlights how Mission Health has the ability to use the margin cap to its advantage:

The Margin Cap also creates an incentive for MHS to lower its margin by paying higher-than-normal prices for its inputs. This might take the form of MHS being willing to pay more than others in competitive bidding for hospitals, for empty land on which to build new facilities, or to outbid rivals when purchasing physician practices. 

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