Appeals Judge Highlights Key Problem With Certificate-of-Need Law | Beaufort County Now | At least one judge considering the latest certificate-of-need case at the N.C. Court of Appeals sees a key problem with the state’s CON law.

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Publisher's Note: This post appears here courtesy of the Carolina Journal. The author of this post is CJ Staff.

    At least one judge considering the latest certificate-of-need case at the N.C. Court of Appeals sees a key problem with the state's CON law.

    "I think part of the challenge we have is that even the fundamentals of the certificate-of-need regime are somewhat counterintuitive," said Judge Richard Dietz, one of three judges hearing oral arguments Tuesday. The case is called Wake Radiology Diagnostic Imaging v. N.C. Dept. of Health and Human Services.

    "If you were explaining to someone — we're going to limit competition in order to reduce prices, they would say, 'What? You just said that backward,'" Dietz added.

    "I understand it's much more complicated when it comes to health care pricing, and there are reasons why we have this complicated system," he said. "But particularly like this, when it's counterintuitive, it seems dangerous for us to try to imagine legislative intent."

    "The best thing we can do is just look in the statute and say, 'What do the words in the statute say?'"

    Carolina Journal reported in July that Dietz is a potential candidate for N.C. Supreme Court in 2022.

    Dietz shared his thoughts about the CON law while questioning Frank Kirschbaum, the lawyer representing plaintiff Wake Radiology in the case.

    Kirschbaum's client wants the court to reverse a 2019 state government agency decision. That decision allowed a competing health care provider, the Bone and Joint Surgery Clinic, to expand its use of a magnetic resonance imaging scanner first purchased in 2018 to replace a broken MRI machine.

    The new scanner had greater technical capabilities than the broken equipment, which had a CON for a limited demonstration project. Wake Radiology lost an earlier court battle when it tried to block Bone and Joint from purchasing the higher-grade MRI machine in connection with that demonstration project.

    Now Wake Radiology argues that an agency decision favoring Bone and Joint the following year violated state CON law. The state agreed in 2019 to allow Bone and Joint to expand use of its 2018 scanner.

    Dietz recognized that the case raised legitimate questions about the CON law. CON typically limits health care providers' ability to build and expand facilities, add beds, or buy major pieces of medical equipment. Taking any of those actions requires state government's permission.

    "I would describe it, in looking at what happened here, as sort of like a loophole," Dietz said.

    "There's a loophole in this process that would potentially allow someone to do exactly what happened here: Buy some piece of equipment, or maybe it's an entire surgical suite that has all kinds of functionality to be used as a replacement for a more limited ... machine or surgical equipment in some certificate of need, but say 'We're only going to use it for that more limited purpose,'" Dietz added. "Then, come in later and say, under this provision now, as long as it's within one year of the [demonstration] project ending, 'We're going to ask for a change to allow us to use the expanded functionality.'"

    It's not clear what judges should do about the loophole, Dietz said. "How is that a concern of ours if we look at the statute and say this can happen?" he asked. "It's for the legislature — the folks over on Jones Street — to say, 'Well, we didn't want this loophole. Let's close it."

    Kirschbaum urged Dietz and his colleagues to focus on the legislature's intent. "If it is viewed as the manufacture of project completion so that you can then change the use of the scanner, then I would say that would be a loophole," he said. "But this court doesn't have to allow a loophole. This court can carry out the legislative intent."

    Dietz and colleagues Allegra Collins and Fred Gore will weigh arguments in the case. It's not clear when they will issue a ruling.

    Meanwhile, the General Assembly continues to consider legislation that would scale back or even eliminate North Carolina's certificate-of-need program. Like Dietz, CON critics have questioned the idea that a law limiting access to health care facilities and equipment can reduce health care costs.
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