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Certificate of Need: A Bad Law Leads to Bad Behavior

My research brief today answers nine questions about the remarkably “unremarkable” Certificate of Need (CON) law case just decided in the N.C. Court of Appeals. Still, I’d like to highlight the ridiculous behavior this “Soviet-style” central planning has created in North Carolina:

Reading the decision, one picks up the following. InSight was going to serve two locations, and Mobile Imaging, six. Two host facilities — it is important to note — was the minimum requirement for the CON. InSight had “proposed a statewide mobile PET route with the scanner moving weekly between six potential host sites in eastern, central, and western North Carolina” but “At least three potential host sites told InSight they would not provide documentation to support its CON application due to their concerns about [Mobile Imaging’s] reaction.”

InSight had testified that the UNC Health–affiliated Mobile Imaging maintained an “effective monopoly on mobile PET services” and “described [Mobile Imaging’s] history of opposing opportunities to allow additional providers to introduce services to North Carolina’s health care market.” The potential host sites declining to support InSight’s CON application “were wary of taking action to put their current service with [Mobile Imaging] at risk.”

Remember about the two host facilities? Mobile Imaging “undertook efforts to encourage InSight’s two host sites to rescind their support for InSight’s CON application” — going so far as to “draft rescission letters for both of InSight’s host sites: Caldwell and Harris Regional. Caldwell’s president signed the letter. Harris’ did not.” Fortunately for InSight, the agency, ALJ, and appellate court all saw through Mobile Imaging’s “anti-competitive behavior to ensure it was awarded the CON.”

Unfortunately for North Carolina health consumers, as well as Mobile Imaging and the other two competitors in this case, North Carolina’s policymakers have not seen through the greater anticompetitive problems wrought on this state by CON law.

As I wrote in the brief, who is harmed by all this? It should be obvious, and it’s why the John Locke Foundation has long advocated repeal of North Carolina’s CON law: “People with a medical need for mobile PET scanners are harmed while health care companies wage high-stakes battles in state courts over state agency decisions regarding a law that 15 states and the federal government have already ditched for making health care more costly and less accessible to citizens.”

Jon Sanders / Research Editor and Senior Fellow, Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...