North Carolina’s certificate-of-need debate has reached new stakes in the last two years, with numerous legal controversies surrounding the contended policy.
Jim Tebay, a retired organizational consultant who has worked as a fractional C-suite executive and turnaround advisor for healthcare service providers, argues there is a narrower problem lawmakers could fix first in an opinion column published by The Wilson Times Oct. 6.
Mr. Tebay pointed to AdventHealth’s planned 67-bed hospital in Weaverville, N.C. State regulators awarded the Altamonte Springs, Fla.-based system a certificate of need for the project in 2022. Legal challenges to the award then worked their way through the administrative process and the courts, and the hospital did not break ground until this year.
“Winning a CON does not necessarily mean a provider can proceed with the project the state has approved,” Mr. Tebay wrote.
The issue, he argued, is not whether competitors should be able to challenge a CON decision. If regulators make a significant procedural or substantive error, there should be a way to correct it. The question is whether the right to challenge a decision should also give a competitor the power to keep an approved project from moving forward while that challenge plays out.
Under current state law, an affected party can request a contested-case hearing after a CON decision and then seek judicial review. A party appealing a granted CON must post a bond equal to 5% of the project’s cost, with a $5,000 minimum and a standard cap of $50,000. The approved applicant can ask the North Carolina Court of Appeals to raise the bond to as much as $300,000. For a large health system contesting a project worth tens or hundreds of millions of dollars, Mr. Tebay argued, a $50,000 bond may be relatively insignificant.
“The question is not whether a competitor should be prevented from challenging a legitimate error,” he wrote. “The question is whether the cost and duration of an appeal are sufficiently significant that litigation cannot become a means of delaying competition.”
Mr. Tebay outlined three changes the General Assembly could make without overhauling the CON system. The first is a firm timetable for administrative proceedings and judicial review, with limited extensions for clearly defined circumstances. The second is a substantially larger bond for appeals of major projects, potentially tied to the size of the project or to the costs a delay could impose. The third would allow construction to continue during judicial review unless a challenger obtains a stay under a defined legal standard.
“That approach would preserve judicial review while recognizing that an appeal should not automatically function as a stop sign,” he wrote.
The stakes extend beyond legal fees. Building a hospital requires financing, property, architects, contractors, permits and substantial commitments of capital and personnel. Each year of delay can raise construction costs, threaten a project’s financial viability and postpone the services the state determined a community needed when it issued the CON.
Mr. Tebay described that as the system’s central irony: North Carolina requires a provider to demonstrate need before it can build, yet the winning applicant may spend years defending the state’s own finding before it can meet that need. He stopped short of concluding that every appeal of the Weaverville award was improper, and said the reforms do not require deciding whether the CON program should survive.
“At some reasonable point, a government decision needs to become final,” he wrote. “A Certificate of Need should mean that the state has determined a project may proceed without the unreasonable delays that currently have become the norm.”
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