Why are hospitals opposing Medicaid expansion in North Carolina?

North Carolina recently came close to passing Medicaid expansion, which would have covered over 600,000 additional residents. The Senate and House needed to negotiate details between their respective versions of expansion. Negotiations were unsuccessful, largely due to opposition from the state’s hospital association, Axios reports. Why would hospitals oppose Medicaid expansion, which would greatly reduce their burden of uncompensated care? Because the Medicaid expansion deal was packaged with changes to the state’s “certificate of need” laws. Here’s more about these laws and why they matter for Medicaid expansion in NC.

“Certificate of Need” Laws: Well-intentioned monopoly-makers

“Certificate of Need” laws were created with the intention to curb medical overuse and health care costs. They prohibit healthcare providers from buying expensive equipment (like building a proton beam center) or expanding their practice without first proving the need to do so. The laws are administered on a state level.

Good intentions do not ensure good outcomes, however. Certificates of Need (CONs) can be corrupted and facilitate non-competitive behavior. This matters because expensive elective procedures are what drives hospital profits –  if only larger organizations can install the expensive equipment needed to perform these procedures, it sets up a profitable monopoly with high barriers to entry. This can also choke out smaller providers if they cannot perform those profitable elective procedures, resulting in reduced access to care. 

In North Carolina, the CON laws are particularly restrictive. The Senate’s version of the bill would have loosened CON laws, which threatens the monopoly. The North Carolina hospital association’s opposition to the expansion bill was due to the one and only reason any organization makes their decisions – profits. Loosening CON laws mean the larger, more profitable hospitals may have to share a slice of the pie. 

The “hospital cartel”

Hospitals blocking Medicaid expansion is the latest example of NC hospitals using their power to keep control over the market. It’s no wonder some frustrated policymakers refer to NC hospitals as a “cartel.”

“A cartel is defined as an association which is formed to restrict competition or raise prices. We have seen the cartelization of healthcare in North Carolina because they control the supply of healthcare through the certificate of need…they control the access, the quality, the price.”

-NC State Treasurer Dale Folwell at the Lown Institute’s Fair Share Spending 2022 event

Our system is broken for everyone

The fact that hospitals would rather protect their monopoly on ambulatory surgery and other high-margin procedures than expand basic care coverage to hundreds of thousands of people shows that something is terribly wrong with our healthcare system. Our system values and incentivizes elective care for privately-insured people more than anything else — it is the key to profitability for hospitals, which is why they won’t let it go. 

If we had equal rates of reimbursement for all people, regardless of insurance status, and payments based on value rather than volume, Medicaid patients would be more attractive to hospitals and they would likely push harder for Medicaid expansion. But that doesn’t mean we should let these hospitals off the hook just because they claim that loosening the CON laws would make it harder for them to stay afloat financially. Overall, nonprofit hospitals in NC have a $366 million fair share deficit — meaning their tax breaks are worth that much more than their community benefit spending. Many NC hospitals have profits to spare, and should prioritize increasing coverage for uninsured people in the state over their bottom line.