Cost vs. care: NC bill renews debate over certificate of need laws (2025)

Grace Hayba, WRAL health reporter

A political fight that’s been brewing at the statelegislature for years could come to a head this summer, as some lawmakers andadvocates look to reverse a decision made nearly 50 years ago and change thehealth care landscape in North Carolina.

Health facilities in North Carolina have been required toabide by Certificate of Need (CON) laws since 1978. The laws require approvalfrom the North Carolina Department of Health and Human Services before aprovider can build new facilities, substantially expand services or add major,specialized equipment.

The original purpose of CON was to prevent “unnecessaryincreases in health care costs” and limit “unnecessary health services andfacilities based on geographic, demographic and economic considerations,”according to the NC Division of Health Service Regulation.

Supporters said the rules ensure hospital access in ruralparts of the state and also keep costs down, by stopping hospitals fromentering into arms races against one another for the fanciest equipment orbiggest facilities — costs that could then be passed on to patients in the formof higher bills.

Critics, however, said it’s un-American for the governmentto tell private businesses they can’t buy tools or build new expansions. Theyalso said the system leads to higher costs by stifling competition. CON rulingsfrom the state can be appealed, leading to years-long legal battles that favordeep-pocketed health care corporations. Critics said that allows big hospitalchains to stomp out competition by smaller companies or individual doctors.

Senate Bill 370 is the latest effort by lawmakers to repealCON altogether statewide. The bill, titled ‘Lower Healthcare Costs,’ has passedthe state Senate and is also included in the budget proposal.

Senate Republicans have tried for years to repeal CON laws,but they’ve been stymied by their fellow Republicans in the state House ofRepresentatives — where the hospital industry has focused large amounts ofmoney on lobbying and campaign donations. Some minor tweaks to the rules havebeen passed, but efforts for a full-scale repeal have failed.

This year, however, the stakes are different. There’s newleadership in the state House — House Speaker Destin Hall has replaced longtimeformer Speaker Tim Moore, who’s now in Congress — and there’s a lawsuitmoving forward that could lead to the entire CON system being ruledunconstitutional.

It was filed by a New Bern eye doctor who said he couldperform surgeries for thousands of dollars less than the local hospitalcharges, but that CON laws have prevented him from being allowed to buy thenecessary equipment.

The implications of repealing CON laws are multifaceted.

Supporters of repeal said it would lower costs for patientsby increasing the number of facilities in an area and driving up competitionbetween providers.

“The idea behind certificate of need was always flawedbecause the idea was you're going to limit supply and thus make health caremore affordable, and the basic laws of economics say it doesn't work that way,”said Mitch Kokai, a senior political analyst with the John Locke Foundation.“If you want more access to care, if you want more affordable care, you want agreater supply of care.”

Those against the bill suggest without CON oversight, thegrowth of health care facilities could lead to unnecessary duplication ofsimilar services in the same areas, causing higher expenses for patients andhealth systems.

The North Carolina Healthcare Association lobbies on behalfof hospital companies. Its chief executive Josh Dobson is among those whovocally oppose the complete repeal. A former Republican politician, Dobsonserved in the state House of Representatives and was elected North CarolinaLabor Commissioner in 2020, although he served less than one term beforeresigning to take the hospital lobbying job.

In 2023, when North Carolina expanded Medicaid, part of thedeal reached by Republican lawmakers, Democratic Gov. Roy Cooper and thestate’s health care industry was that hospitals would agree to some CONreforms, since Medicaid expansion would bring them substantial amounts ofadditional funding. Dobson said those should remain the only changes, at leastfor now.

“Our estimates already indicate those changes areresponsible for approximately $700 million in cost to hospitals,” Dobson said.“If we do away with all of CON, it would no doubt cause challenges – and that’sin addition to all of the other things that we’re facing in North Carolina:Medicaid expansion going away is on the table, state directed payments tohospitals is on the table.”

Any reduction in federal funding will trigger a shutdown under the state's current Medicaid law. It wouldterminate Medicaid access for more than 640,000 people in North Carolina.

Those on both sides of the debate agree rural areas arelikely to feel the biggest impact if the repeal is enacted.

Those who back repeal said it would allow providers to buildin areas with less competition. Conversely, opponents argue that repealing CONwould lead to the closure of already struggling facilities.

“It would create a challenge for our hospitals. No questionabout it,” said Dobson. “The challenges that rural and underserved areas facedo get magnified more than other areas of our state that are doing better. Ithink CON is no different.”

Without these regulations, Kokai argued health carefacilities could more quickly and easily expand to meet changing communityneeds – such as increasing the number of available beds.

“We’ve seen issues where different hospitals chains –usually in this area it’s Duke, UNC and WakeMed – fighting it out for a handfulof beds that the state is willing to provide through certificate of need,” saidKokai. “If this process didn’t exist, they could expand as much as they wantedto.”

Kokai added, “It's a system that, in general, is riggedagainst innovation. It's rigged against newcomers. It's designed to help theentrenched incumbents stay in place.”

Dobson, however, argues the path to adding more beds wasalready addressed and simplified under the reforms passed as part of Medicaidexpansion. The bill also included several other debated issues includingincreasing the threshold for replacement equipment from $2 million to $3million and removing DHHS licensed ambulatory surgical facilities from CONreview in populations greater than 125,000 in November 2025.

“We have a compromise in place. We’ve agreed upon languagethat hasn’t even played itself out yet,” Dobson said. “My ask – and I’m proudto stand with the Association for Home and Hospice Care of North Carolina, theNorth Carolina Health Care Facilities Association, and the North CarolinaSenior Living Association – to the General Assembly is to let the compromisethat we have in place play out before we add to the challenges that are alreadyon the table, both at the federal and state level.”

If new providers only offer more profitable services, itcould jeopardize essential – but less lucrative – services like emergency careor coverage for Medicaid patients in existing hospitals, particularly inlow-income areas.

Several other states have enacted similar legislation torepeal or significantly modify their CON laws, including South Carolina in2023.

If approved, the repeal of CON in North Carolina would takeeffect in January 2026.

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