In October, a North Carolina Supreme Court sent an ophthalmologist's lawsuit challenging state certificate-of-need laws back to trial with instructions for a much broader trial to determine the law's constitutionality.
"The complaint contains allegations that, if proven, could render the certificate-of-need law unconstitutional in all its applications," the justices wrote in their ruling.
Jay Singleton, MD, an ophthalmologist, filed the lawsuit in 2020 alleging that under current law, he can only perform an "incidental" amount of surgeries. State planners "projected no need" for his services around the location of his practice in New Bern, N.C.
"In truth, banning Dr. Singleton from offering surgeries to all patients at his clinic serves one purpose only: protecting established providers from competition," Dr. Singleton's lawsuit claimed. "That is unconstitutional."
Richard Saver is a professor of law at the University of North Carolina Chapel Hill who works in the departments of social medicine, the UNC school of medicine and the UNC Gillings School of Public Health. He discussed the significance of this case and its potential impacts on CON law nationwide with Becker's:
1. Mr. Saver said that the state Supreme Court's decision in this case is notable as it changes the technical distinction in the case from an as-applied challenge to a facial challenge. This means that instead of evaluating the constitutionality of the law as it applies to Dr. Singleton's case specifically, the North Carolina trial court will evaluate the law's constitutionality as a whole.
2. North Carolina has made incremental changes to CON laws in the past. In 2023, the state signed legislation exempting "qualified urban ambulatory surgical facilities” from CON review, among other changes. Additionally, the North Carolina Senate proposed its budget for the next two fiscal years would drop such requirements in urban areas on the condition that those ASCs meet the Medicaid and self-pay threshold.
3. The possible effects of an overturn of North Carolina's CON laws could be difficult to predict in a state that has existing heated competition between healthcare providers, numerous urban areas and large universities, as well as rural areas experiencing gaps in healthcare.
"This may vary region by region," Mr. Saver said. "In highly competitive markets like we have here in the Research Triangle, or in other segments of the state, the major health systems are still going to be competing with each other, and there may be competitive pressures because of that to lower cost to entrance," should CON be overturned.
He added that providers will need to think more carefully about what services they want to offer and whether they will satisfy the market.
4. He also said that in rural and underserved areas, proponents of CON laws would say that "one of the advantages of the law is that it encourages a better optimal allocation of resources and facilities across the state, including ensuring that underserved rural areas will still have" necessary services like emergency rooms and MRIs, which might otherwise be difficult to allocate without regulation.
5. However, the law can also be used by "incumbent" health systems to edge smaller competitors, like Mr. Singleton, out of the market, given the regulatory cost and burden of earning CON approval.
"Taking the CON law away will theoretically lead to more media competition, which may benefit consumers in those markets," he said. "So I could see the dismantling law having very different effects across different parts of the state."
6. If the law is overturned, North Carolina could set a precedent for other states with similar legal challenges.
"It's possible that other courts, while not bound by what the North Carolina Court does in its interpretation of the North Carolina constitution, would nonetheless look to the North Carolina Court's reasoning as influential and persuasive as those other courts may grapple with similar challenges under their state constitutions," Mr. Saver said.
7. Mr. Saver added that the nature of healthcare market regulations make CON laws "counterintuitive," due to the fact that consumers are guided through the market by referrals from their physicians, health plans and other external factors, further complicating predictions for the future.
"North Carolina being a purple state, and the CON law itself attracting odd bedfellows in terms of who we would expect to wind up politically in favor [or] against, I don't think that anyone was expecting we would see a complete dismantling of the law anytime soon. But now, this case has the potential to bring that," he said.