North Carolina’s Certificate of Need Law Is One Reason Why Charlotte Health Care Costs Are So High

The government has filed a lawsuit against a hospital system in North Carolina about a problem that the government itself created.

Late last week, Attorney General Roy Cooper and the Department of Justice (DOJ) filed a lawsuit against Charlotte-based Carolinas HealthCare System (CHS) for prohibiting insurance companies from incentivizing their policyholders to seek care at competing facilities that provide services at a lower cost. This concept is formally referred to as “steering.” The plaintiffs argue that such anti-steering clauses illegally reduce competition in the health care market, a violation of the Sherman Antitrust Act.

An in-depth reading of the complaint elaborates on what steering vehicles insurers typically use to push patients to search for lower health care cost options. Narrow networks and tiered networks (top-tiers being those that bring patients the best value for their health expenditures by offering services at high quality and low cost) are just two examples. Apparently, Carolinas throws its weight around by not letting participating insurers formulate top-tier networks that include CHS competitors, or develop narrow networks that exclude CHS. The the state’ largest hospital system certainly has the leverage to do so – namely because they’ve captured 50 percent of Charlotte’s health care market and insurers may not be viable if they walked away from the monolith.

Some thoughts on this:

  • Avoiding competition allows CMS to burden patients with higher health care costs. But the contractual terms aren’t necessarily the root cause of this monopolistic behavior. The actual problem here is the excessive amount of government regulation pervasive in our nation’s health care system.
  • North Carolina’s Certificate of Need (CON) law – a law in which the government limits the supply of health care resources unless there is a “need” in a particular area – is just one of the many policies that induces protectionist behavior among hospitals and health care providers. CON law helped create the fact that prices for some medical services in the Charlotte region are 20 percent higher than the national average.
  • If state policymakers and state government officials are seriously concerned about restoring health care freedom and preventing health care monopolies in North Carolina, then repealing CON is a quicker way to help lower health care costs since a freer market welcomes more competition. Lawsuits… not so much.
  • If CON law didn’t exist in North Carolina, insurers would probably be able to walk away from these “anti-steering” contracts and still remain in business due to the likelihood that there would be more health care organizations to conduct business with.

For more information on Certificate of Need, be sure to visit JLF’s restorehealthcarefreedom.com

Katherine Restrepo / Director Of Healthcare Policy

Katherine Restrepo is the Director of Healthcare policy at the John Locke Foundation. Before joining the John Locke Foundation, she interned at the Cato Institute under the di...