What is Certificate of Need?

Blog | April 16, 2019


By Michelle Ries


 Legislators at the North Carolina General Assembly recently proposed a bill that, among other provisions, would eliminate the state’s Certificate of Need statute for health care facilities.


The Health Care Expansion Act of 2019 (Senate Bill 361) proposes a repeal of North Carolina’s Certificate of Need statute. The Act would also provide $41 million in state funding to increase services for intellectually and developmentally disabled individuals through the state Medicaid program, include North Carolina in a multi-state agreement allowing psychologists to practice across state lines, and include licensed family and marriage counselors in the list of providers who can evaluate individuals under consideration for involuntary commitment.


The bill is sponsored by Sens. Joyce Krawiec (R-District 31 – Davie, Forsyth), Dan Bishop (R- District 39 - Mecklenburg), and Ralph Hise (R-District 47 – Madison, McDowell, Mitchell, Polk, Rutherford, Yancey).


What is Certificate of Need?


The North Carolina Certificate of Need law prohibits health care facilities from adding, acquiring, or replacing health care facilities or equipment without prior authorization by the state Department of Health and Human Services. New health care facilities[1] must obtain a Certificate of Need before construction. A Certificate of Need is also required for provision of certain medical services, as well as for health care facilities to upgrade or renovate facilities, if the upgrade/renovation is over a specified amount of expenditure.


The Certificate of Need law was established to provide regulation of health care facilities in order to reduce unnecessary and costly duplication of services. Health care providers and facilities must apply to the Department of Health and Human Services to obtain a Certificate of Need, and the Department reviews applications to ensure that facilities meet certain state-mandated criteria.


The Debate


Proponents of Certificate of Need laws argue that the law reduces costs of care for patients and insurers, improves access to needed care, and improves quality of care. In addition, proponents argue that the state needs the Certificate of Need law in order to ensure access to services in underserved areas; without Certificate of Need, competitors providing costly services such as imaging or surgical services in other facilities could impact the ability of rural hospitals to remain financially solvent and avoid closure.


Opponents of Certificate of Need laws argue that they do not serve to meet the goals of improving access or quality, and that restricting providers’ and facilities’ flexibility in providing services is detrimental to health care provider competition and patient choice.


[1] Includes hospitals, psychiatric facilities, chemical dependency treatment facilities, nursing home facilities, adult care homes, kidney disease treatment centers, intermediate care facilities for mentally retarded, rehabilitation facilities, home health agencies, hospices, diagnostic centers, and ambulatory surgical facilities https://www2.ncdhhs.gov/dhsr/coneed/index.html