NC Legislature Hears from Dawn Carter on Certificate of Need Reform

CON/CHNA/Regulatory

As North Carolina considers various proposals for Certificate of Need reform, the state’s General Assembly invited Ascendient founder Dawn Carter share her CON expertise with the Joint Legislative Committee on Access to Healthcare and Medicaid Expansion.

In a 30-minute presentation followed by 10 minutes of questions, Dawn used extensive data to refute the notion that CON regulations are expensive, inefficient, and anti-competitive.

“We at Ascendient started studying this CON question probably a decade ago and a lot of our analysis that you will see is based on the study of more than 300 variables across all 50 states plus the District of Columbia,” she told lawmakers. “It is a comprehensive look at CON status, demographic information, as well as healthcare utilization and spending across all states.”

Here are a few highlights from the presentation:

• Despite critics’ claims that CON laws suppress the number of urgently needed hospital beds, the data suggest just the opposite: When controlling for population density, North Carolina and other CON-prevalent states have about twice as many hospitals per 1,000 square miles, meaning residents have better geographic access to the healthcare they need, compared to non-CON states.
• Inpatient occupancy rates are about 20% higher in NC than in non-CON states, meaning that hospitals are operating more efficiently. As with airline seats, empty hospital beds are a non-performing asset.
• CON laws also promote health equity in states like NC, which tend to be about twice as diverse as non-CON states. For instance, take a resident living in a county with above-average racial diversity and no local hospital. In the average non-CON state, she would have to drive 28 miles to find hospital care. In NC, her drive would be only 17 miles – suggesting again that CON laws promote healthcare access in geographic areas that lack typical financial incentives.
• In sheer economic terms, regulated competition – like a CON process – seems to result in lower costs than unbridled competition. North Carolina currently has the 13th lowest inpatient payment rate in the US – about $1,000 lower than the non-CON states. If NC hospitals charged the median rate found in non-CON states, the cost of inpatient services would increase by almost $1 billion a year.

Rather than Certificate of Need reform, Dawn stressed repeatedly that policymakers should focus on payment structures and financial incentives. As long as providers are paid on a fee-for-service basis, they are incentivized to focus on quantity rather than outcomes. As CMS pushes forward with value-based payments and other aspects of healthcare transformation, providers will have less financial incentive to over-build or over-invest in technologies that require high utilization rates.

“We are on this path to transforming payment,” Dawn said. “When the incentives for payment are aligned with the value and the outcomes for the patient rather than the volume of services that are delivered, then I think that may be an appropriate time to reconsider certificate of need laws.

“But in the meantime, we are in this still in this volume-based world with an industry that is quite taxed after the last two years and in quite a state of flux as this transformation is underway. I think any repeal of certificate of need at this point in time would be premature.”