J. Justin Wilson
J. Justin Wilson · April 23, 2020

Arlington, Va.—Today, the Institute for Justice (IJ) partnered with medical professionals in two states to challenge laws that limit medical access and entrepreneurship. The lawsuits, which target certificate of need (CON) laws in Nebraska and North Carolina, challenge the constitutionality of laws that artificially limit doctors, hospitals and other medical professionals’ ability to provide services in excess of governmentally determined “need.” The lawsuits come amidst a nationwide shortage of hospital beds, which has been exacerbated, in part, by state CON laws.

“It shouldn’t have taken a worldwide pandemic to realize that putting arbitrary limits on the availability of medical facilities and equipment is a shortsighted policy,” said Renée Flaherty, an attorney at IJ who filed the NC lawsuit. “Certificate of need laws are a relic of a policy abandoned by the federal government decades ago. At this point, their only purpose is to protect health care conglomerates’ monopoly on care. We filed these lawsuits today to ensure that we don’t repeat the mistakes of the past.”

Certificate of need laws limit healthcare access by forcing medical entrepreneurs to get a government permission slip to offer or expand services. To do that, they have to prove that their services are “needed” before they can start their business. For instance, CON laws across the country cover everything from hospitals that want to add additional ICU beds, to doctors who wants to perform outpatient surgeries, to transportation companies that would like to drive patients to routine medical appointments. If the government deems that there are already “enough” providers in a region, then the CON is denied.

Nebraska and North Carolina require CONs for a number of medical services:

  • In Nebraska, operating a non-emergency medical transport requires a “certificate of public convenience and necessity.” Getting the certificate requires a business owner to prove not only that they are able to safely provide service, but also that their business will not financially impact existing providers. Essentially, an entrepreneur has to get their future competitors’ permission to start their business. Omaha Home healthcare business-owner Marc N’Da applied for the CON, was declared “fit, willing, and able” to provide service, but was denied the CON after existing transportation companies objected.
  • In North Carolina, state regulators determine the need for surgery centers on a county-by-county basis. With government-determined “need” already being met almost exclusively by existing hospitals, it is practically impossible to open an outpatient surgery center in most parts of the state. Dr. Jay Singleton owns an ophthalmology practice in New Bern. While he could safely provide common outpatient surgeries at his facility, he is required to perform certain procedures at a local hospital. Surgeries at the local hospital cost thousands of dollars more than what Dr. Singleton could charge at his center.

N’Da and Dr. Singleton partnered with IJ to file lawsuits challenging CON laws under the Nebraska and North Carolina state constitutions. A win in either case would pave the way for future CON challenges.

In total, 35 states plus the District of Columbia have some form of CON law in place. Because CONs intentionally limit the supply of health services, 22 of those 35 states have waived certain requirements in light of the COVID-19 epidemic. Both North Carolina and Nebraska waived CONs for adding hospital beds during the crisis. A 2016 study by the Mercatus Center at George Mason University found that in states where there is a CON for acute hospital beds, there are on average about 131 fewer beds per 100,000 people.

“Research demonstrates that CON laws fail to control routine healthcare costs, and, in many cases, patients pay significantly more because a few companies monopolize services,” said IJ Attorney Will Aronin. “At the same time, CON laws also limit the growth of medical providers and their ability to respond to market forces. If a hospital thinks it needs more beds, it should be able to add those beds without getting permission from the government. It is time for states to let hospitals, doctors and entrepreneurs bring more competition and choice to the healthcare marketplace.”

Challenging CONs is one part of the Institute for Justice’s effort to help individuals and small businesses fight the COVID-19 pandemic. In recent weeks, IJ has urged state medical boards to reevaluate scope-of-practice regulations requiring that nurse practitioners be supervised by a physician. The IJ Clinic on Entrepreneurship and activism teams created websites to help connect small businesses offering essential products and services to consumers in Chicago and Washington, D.C. IJ filed a lawsuit on behalf of a Washington state woman stopped from running a “little free pantry” to help her neighbors in need. IJ also has existing lawsuits against CONs in Kentucky and Iowa.

“The Institute for Justice calls on states to take immediate action to lower barriers so that people can get greater access to health care and essential resources during the COVID-19 pandemic,” said IJ President and General Counsel Scott Bullock. “This is part of IJ’s long-term strategy to eliminate barriers to competition and choice in health care and many other occupations.”