Carolinas Pilot New Hospital Regulations: A Comprehensive Test
TL/DR –
North and South Carolina are embarking on two different methods to reform the certificate of need (CON) laws, which require hospitals and healthcare providers to obtain government approval before opening new locations or offering new services. North Carolina has made gradual changes, ending the CON requirement to expand capacity at psychiatric and addiction-treatment facilities and planning to relax regulations for surgical and imaging centers in certain counties by 2025. In contrast, South Carolina has more ambitious plans to eliminate almost all CON requirements by 2027, leaving only nursing homes under the regulation.
Carolina States Test Contrast Models for Hospital Regulation
North and South Carolina will explore two different models for increasing choice and competition in their highly regulated hospital sector over the next five years. The experiment arises from an agreement between the North Carolina General Assembly and Governor Roy Cooper to expand the state’s Medicaid program.
Lawmakers fine-tuned state laws that require hospitals, surgical centers, and other providers to acquire certificates of need (CON) from the government to expand or start new services. As reported by Charlotte Business Journal, the requirement for a CON to expand capacity at psychiatric and addiction-treatment facilities has been eliminated in North Carolina. By 2025, surgical and imaging centers in 23 counties will no longer need a CON.
South Carolina enacted ambitious CON reform in 2023, planning to virtually abolish all CON requirements over the next three years. By 2027, only nursing homes will be under CON legislation.
Healthcare attorney Robb Leandro expressed concern over the sweeping reforms in South Carolina, arguing that CON still has a place in rural communities. He fears that if other facilities attract paying customers away from rural hospitals, it could lead to declining quality of care or closure due to lower reimbursement rates from Medicare and Medicaid patients.
However, evidence suggests states without CON regulations actually have more hospitals and surgical centers in rural areas. A study by Mercatus Center at George Mason University found that rather than protecting access to rural healthcare, CON laws are correlated with decreased rural access.
Recent CON studies reinforce the common-sense notion that reducing competition in healthcare typically increases cost and reduces quality. A systematic analysis of all CON studies until 2020 concluded that the expected costs of CON exceed its benefits.
These reforms enacted by North and South Carolina provide a real-world examination of the pros and cons of CON reform. North Carolina is gradually implementing it, whereas South Carolina is aggressively pursuing it. It remains to be seen how these contrasting approaches will impact prices, quality, and service availability in rural areas.
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