FTC Staff Comment, and Concurring Comment of Commissioner Wright, Regarding North Carolina House Bill 200, Which Would Exempt Diagnostic Centers, Ambulatory Surgical Facilities and Psychiatric Hospitals From Certificate of Need Regulation

UNITED STATES OF AMERICA
Federal Trade Commission
WASHINGTON, D.C. 20580
Office of Policy Planning
Bureau of Economics
Bureau of Competition
July 10, 2015
The Honorable Marilyn W. Avila
North Carolina House of Representatives
2217 Legislative Building
16 W. Jones Street
Raleigh, NC 27601-1096
Dear Representative Avila:
The staffs of the Federal Trade Commission’s (“FTC”) Office of Policy Planning, Bureau of
Economics, and Bureau of Competition1 appreciate the opportunity to respond to your invitation for
comments on North Carolina House Bill 200 (“HB200”).2 As described in your letter, HB200 “is
intended to exempt diagnostic centers, ambulatory surgical facilities and psychiatric hospitals from
Certificate of Need regulation.” The bill also prohibits limitations on the number of operating rooms
and gastrointestinal procedure rooms, and contains requirements to “ensure the provision of charity
care, to require annual reporting and to facilitate coordination with hospitals.” To the extent that
HB200 narrows the application of North Carolina’s Certificate of Need (“CON”) law, it likely
represents a procompetitive improvement in the law as compared with the status quo.
CON laws have the laudable goals of reducing health care facility costs and improving access
to care.3 However, CON laws can prevent the efficient functioning of health care markets in several
ways that may undermine those goals. First, they often create barriers to entry and expansion, limit
consumer choice, and stifle innovation. Second, CON laws can be prone to exploitation by
incumbent firms seeking to thwart or delay entry by new competitors. Third, as recently illustrated by
the Commission’s experience in the Phoebe Putney case, CON laws can deny consumers the benefit
of an effective divestiture-based remedy following the consummation of an anticompetitive merger.
Finally, CON laws appear to have generally failed to control health care costs. For these reasons,
each of which we explain more fully below, FTC staff supports HB200.4
I. 	The FTC’s Interest and Experience in Health Care Competition
Congress has charged the FTC with enforcing the Federal Trade Commission Act, which
prohibits unfair methods of competition and unfair or deceptive acts or practices in or affecting
commerce.5 Competition is at the core of America’s economy,6 and vigorous competition among
sellers in an open marketplace gives consumers the benefits of lower prices, higher quality goods and
services, greater access to goods and services, and innovation.7 Pursuant to its statutory mandate, the
FTC seeks to identify business practices, laws, and regulations that may impede competition without
providing countervailing benefits to consumers.

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Because of the importance of health care competition to the economy and consumer welfare,
anticompetitive conduct in health care markets has long been a priority of the FTC’s enforcement,
study, and advocacy efforts. The FTC has extensive experience investigating anticompetitive mergers
and business practices by hospitals, pharmaceutical companies, and physicians. It also has devoted
significant resources to the examination of the health care industry by sponsoring various workshops
and studies. Through the agency’s competition advocacy program, FTC staff has encouraged states to
consider the competitive impact of various health care-related legislative proposals, including CON
laws.8
II. 	North Carolina’s CON Law and HB200
North Carolina’s CON law requires regulatory approval for entry by, or expansion of, a wide
variety of health service facilities and health care activities.9 Covered facilities include, for example,
hospitals, nursing homes, home health agency offices, ambulatory care facilities, and hospice
programs.10 Covered activities include, among others, the construction, development, or other
establishment of health service facilities, certain capital expenditures over $2,000,000, changes in
bed capacity, transplantation services, and the acquisition of certain types of medical equipment.11
The CON process can be time-consuming. In North Carolina, CON applications are made to
the state Department of Health and Human Services’ Division of Health Service Regulation (the
“Division”). According to the Division’s summary of the CON process, CON applications are subject
to a 30-day public comment period, during which any person may file a written comment. Though no
longer required for all applications, a public hearing may be held in some cases. The Division
considers all comments and public hearing materials in its evaluation of CON applications and has
between 90 and 150 days to review an application. Its decisions may be appealed to an administrative
law judge within 30 days, and that judge has 270 days to rule. Further appeal to the North Carolina
court of appeals is also permitted.12 Therefore, the CON process can delay entry by—at a
minimum—many months, even when a CON is ultimately granted.
HB200 proposes to narrow North Carolina’s CON law to exempt diagnostic centers,
ambulatory surgical facilities, gastrointestinal endoscopy rooms, and psychiatric hospitals from the
CON process. The bill also would prohibit limitations on the number of operating rooms and
gastrointestinal endoscopy rooms. Finally, the bill includes certain new licensing requirements for
ambulatory surgical facilities.13 These licensing provisions require that facilities provide a certain
amount of indigent care and provide additional documentation prior to operating in rural areas.
HB200 does not appear to change the CON comment or review process.
III. 	Analysis of Likely Competitive Effects of HB200
Competition in health care markets can benefit consumers by containing costs, improving
quality, and encouraging innovation.14 Indeed, price competition generally results in lower prices,
and, thus, broader access to health care products and services, while non-price competition can
promote higher quality and encourage innovation. CON laws may suppress these substantial benefits
of competition by limiting the availability of new or expanded health care services. For these reasons,
the Commission and its staff have advocated that states with CON laws reconsider whether those
laws best serve the needs of their citizens, and staff supports the bill at issue here, HB200.15

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A. CON Laws Create Barriers to Entry, Which May Suppress More Cost-Effective,
Innovative, and Higher Quality Health Care Options
CON laws, such as North Carolina’s, prevent new entrants from offering health care services
without first obtaining a state-issued approval. By interfering with the market forces that normally
determine supply of services, CON laws tend to suppress competition and shield incumbent health
care providers from competition from new entrants.16 As a result, they can:
• 	Delay, and raise the cost of, entry by firms that are potentially able to offer new, more
cost-effective, or higher quality services;
• 	Reduce the ability of the market to respond to consumer demand for different
treatment options, settings, or prices; and
• 	Remove or delay the competitive pressures that typically incentivize incumbent firms
to innovate, improve existing services, or introduce new ones.17
Because HB200 would exempt certain facilities from North Carolina’s CON law, it may
mitigate these potentially anticompetitive consequences of the CON process for the types of entities
it covers. As a result, it could enable North Carolina’s health care consumers to benefit from
additional competition as new facilities can more easily enter the market.
B. The CON Process May Be Prone to Exploitation by Competitors Seeking to Protect
Their Market Share
In addition to disrupting the market forces that typically determine the supply of services,
CON laws may further harm competition because competitors may take advantage of the CON
process to protect their market share. For instance, an incumbent firm may file challenges or
comments to a potential competitor’s CON application merely for the purpose of thwarting or
delaying competition. As noted in the FTC-DOJ report, Improving Health Care: A Dose of
Competition, existing firms can use the CON process “to forestall competitors from entering an
incumbent’s market.”18 More recently, a 2012 House Select Committee Report on North Carolina’s
CON process described stakeholder concerns “that some appeals may be brought solely for the
purpose of delay.”19 The committee identified the need to “deter the bringing of frivolous, harassing,
or meritless appeals.”20 The misuse of the CON process by competitors not only can cause delay, but
also can divert scarce resources away from health care innovation as potential entrants incur legal,
consulting, and lobbying expenses responding to competitor challenges.21 HB200, by narrowing the
applicability of North Carolina’s CON law, would eliminate the opportunity for this type of
exploitation with respect to exempted health service facilities.
We also note that Section 7(f)(4) of HB200 requires ambulatory surgical facilities
seeking licenses to operate in counties with populations under 100,000 people to obtain written
support and a written transfer agreement from each hospital located within the county.22
Although we recognize that this provision may be intended to ensure access to care and patient
safety, it also could be improperly used by incumbent hospitals to block a potential competitor’s
license. We respectfully encourage you to consider whether there are other ways – less prone to
anticompetitive manipulation – to achieve access and patient safety goals.

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C. CON Laws Can Impede Effective Antitrust Remedies
As the FTC’s recent experience in FTC v. Phoebe Putney demonstrates, CON
laws can entrench anticompetitive mergers by limiting the ability to implement effective
structural remedies. Phoebe Putney involved a challenge to the merger of two hospitals in
Albany, Georgia.23 The FTC alleged that the merger had created a monopoly in the provision of
inpatient general acute-care hospital services sold to commercial health plans in Albany and its
surrounding areas, but ultimately was unable to achieve a remedy that would have restored
competition to the marketplace due to Georgia’s CON laws and regulations.24 As the
Commission explained in its statement on the matter, “[w]hile [divestiture] would have been the
most appropriate and effective remedy to restore the lost competition in Albany and the
surrounding six-county area from this merger to monopoly, Georgia’s [CON] laws and
regulations unfortunately render a divestiture in this case virtually impossible.”25 The
Commission statement further noted that the case “illustrates how state CON laws, despite their
original and laudable goal of reducing health care facility costs, often act as a barrier to entry to
the detriment of competition and healthcare consumers.”26 Thus, HB200, by narrowing the
applicability of North Carolina’s CON law, could preserve antitrust as a tool to remedy
anticompetitive conduct in some health care markets.
D. CON Laws Appear to Have Generally Failed to Control Costs
States originally adopted CON programs, in part, as a way to mitigate the incentives
created by cost-based reimbursement. A primary goal of CON laws was to control health care
costs by preventing overinvestment in health facilities and the resulting misallocation of
resources.27 Empirical studies on balance suggest that these laws have generally failed in their
cost containment goals.28 The empirical evidence also fails to consistently show increases in
health care spending in states that have removed their CON programs, and in fact, one recent
study shows that Medicare expenditures for cardiac procedures fell following repeal of CON
regulations.29
IV. 	Conclusion
FTC staff recognizes that states must weigh a variety of policy objectives when
considering health care legislation such as HB200. But, as described above, CON laws raise
considerable competitive concerns and generally do not appear to achieve their alleged benefits
for health care consumers. For these reasons, FTC staff supports HB200.

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FTC staff appreciates the opportunity to provide our input on HB200. We hope that our
comments will be of assistance as you consider these issues.
Respectfully submitted,
Marina Lao, Director
Office of Policy Planning
Francine Lafontaine, Director
Bureau of Economics
Deborah L. Feinstein, Director
Bureau of Competition
1 This staff letter expresses the views of the FTC’s Office of Policy Planning, Bureau of Competition, and Bureau of
Economics. The letter does not necessarily represent the views of the FTC or of any individual Commissioner. The
Commission, however, has voted to authorize staff to submit these comments. Commissioner Wright concurred in
the Commission’s vote to authorize staff to submit these comments, and also submitted a concurring comment.
2 Letter from the Honorable Representative Marilyn W. Avila, N.C. House of Representatives, to Marina Lao,
Director, Office of Policy Planning, Federal Trade Commission (May 8, 2015); H.B. 200, 2015 Gen. Assemb., Reg.
Sess. (N.C. 2015).
3 As noted, CON laws have been promulgated with aims in addition to lowering costs and prices, such as increasing
access to critical care. See, e.g., The Lewin Group, An Evaluation of Illinois’ Certificate of Need
Program: Prepared for the State of Illinois Commission on Government Forecasting and Accountability (Feb.
2007), available at http://cgfa.ilga.gov/Upload/LewinGroupEvalCertOfNeed.pdf. This letter does not address those
other goals and the extent to which CON laws do or do not achieve them.
4 We are aware that the North Carolina General Assembly is considering several options with respect to the CON
law, and that the legislative status remains fluid as of the drafting of this letter. We note that the budget recently
approved by the Senate contains a provision calling for a phased repeal of the CON law. Our comments in this letter
are limited to HB200 upon which we were invited to comment, but to the extent that the Senate bill repeals CON
altogether, our comments would be relevant to consideration of that bill as well.
5 Federal Trade Commission Act, 15 U.S.C. § 45 (2006).
6 Standard Oil Co. v. FTC, 340 U.S. 231, 248 (1951) (“The heart of our national economic policy has long been
faith in the value of competition.”).
7 See Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 695 (1978) (The antitrust laws reflect “a legislative
judgment that ultimately competition will produce not only lower prices, but also better goods and services. . . . The

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assumption that competition is the best method of allocating resources in a free market recognizes that all elements
of a bargain—quality, service, safety, and durability—and not just the immediate cost, are favorably affected by the
free opportunity to select among alternative offers.”).
8 A description of, and links to, the FTC’s various, health care-related activities can be found at
https://www.ftc.gov/tips-advice/competition-guidance/industry-guidance/health-care.
9 See N.C. Gen. Stat. § 131E-178 (2015).
10 See id. § 176(9b).
11 See id. § 176(16).
12 See N.C. Division of Health Service Reg., Healthcare Planning and Certificate of Need Section, Overview of
Certificate of Need, available at http://www.ncdhhs.gov/dhsr/coneed/overview.html (last visited June 1, 2015).
13 See H.B. 200, 2015 Gen. Assemb., Reg. Sess. (N.C. 2015).
14 See Federal Trade Comm’n & U.S. Dep’t of Justice, Improving Health Care: A Dose of Competition, Executive
Summary, at 4 (July 2004), available at https://www.ftc.gov/sites/default/files/documents/reports/improving-health-
care-dose-competition-report-federal-trade-commission-and-department-justice/040723healthcarerpt.pdf
[hereinafter A Dose of Competition].
15 See A Dose of Competition, supra note 14; see also Joint Statement of the Antitrust Division of the U.S.
Department of Justice and the Federal Trade Commission Before the Illinois Task Force on Health Planning Reform
(Sept. 15, 2008), available at https://www.ftc.gov/sites/default/files/documents/advocacy_documents/ftc-and-
department-justice-written-testimony-illinois-task-force-health-planning-reform-concerning/v080018illconlaws.pdf
[hereinafter DOJ-FTC Illinois Testimony]; Prepared Statement of the Federal Trade Commission Before the Florida
State Senate (Apr. 2, 2008) [hereinafter FTC Florida Statement], available at
https://www.ftc.gov/sites/default/files/documents/advocacy_documents/ftc-prepared-statement-florida-senate-
concerning-florida-certificate-need-laws/v080009florida.pdf; Prepared Statement of the Federal Trade Commission
Before the Standing Committee on Health, Education, & Social Services of the Alaska House of Representatives
(Feb. 15, 2008) [hereinafter FTC Alaska Statement], available at
https://www.ftc.gov/sites/default/files/documents/advocacy_documents/ftc-written-testimony-alaska-house-
representatives-concerning-alaska-certificate-need-laws/v080007alaska.pdf.
16 See A Dose of Competition, supra note 14, ch. 8 at 4.
17 See id; see also DOJ-FTC Illinois Testimony, supra note 15, at 6.
18 A Dose of Competition, supra note 14, Executive Summary at 22.
19 North Carolina General Assembly, House Select Committee on the Certificate of Need Process and Related
Hospital Issues, Final Report to the 2013 House of Representatives, at 13 (Dec. 2012), available at
http://www.ncleg.net/documentsites/committees/HSCCONPRHl/12-06-12/12-06-
12%20HSCCON%20Final%20Report.pdf.
20 Id.
21 What makes this conduct more concerning is the fact that much of it, even if exclusionary and anticompetitive,
may be shielded from federal antitrust scrutiny, because it involves protected petitioning of the state government.
See DOJ-FTC Joint Illinois Testimony, supra note 15, at 6-7; FTC Florida Statement, supra note 15, at 8-9; FTC
Alaska Statement, supra note 15, at 8-9.
22 See H.B. 200, supra note 13.
23 See generally In re Phoebe Putney Health Sys., Inc., Dkt. No. 9348, available at
https://www.ftc.gov/enforcement/cases-proceedings/111-0067/phoebe-putney-health-system-inc-phoebe-putney-
memorial.

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24 The Eleventh Circuit affirmed the district court’s dismissal of the case on state action grounds and dissolved the
stay that had prevented the parties from consummating the merger. The Supreme Court reversed, finding against
state action immunity. See FTC v. Phoebe Putney Health Sys. Inc., 133 S. Ct. 1003, 1011 (2013).
25 In re Phoebe Putney Health Sys., Inc., Dkt. No. 9348, Statement of the Federal Trade Commission, at 1 (Mar. 31,
2015), available at
https://www.ftc.gov/system/files/documents/public_statements/634181/150331phoebeputneycommstmt.pdf.
26 Id. at 3.
27 See A Dose of Competition, supra note 14, ch. 8 at 2; Christine L. White et. al., Antitrust and Healthcare: A
Comprehensive Guide 527 (2013).
28 See, e.g., Patrick A. Rivers, Myron D. Fottler & Jemima A. Frimpong, The Effects of Certificate of Need
Regulation on Hospital Costs, 36 J. Health Care Fin. 1, 12 (2010); DOJ-FTC Illinois Testimony, supra note 15, at 5
& nn.16-18 (collecting studies on the effects of CON laws); The Lewin Group Report, supra note 3, at i-ii (“Based
on our review of relevant literature and our independent analysis, it is clear that the evidence on cost containment is
weak . . . .”); but see Michael D. Rosko & Ryan L. Mutter, The Association of Hospital Cost-Inefficiency with
Certificate-of-Need Regulation, 71 Med. Care Res. & mRev. 280 (2014) (finding lower hospital cost-inefficiency in
CON states than non-CON states).
29 See Vivian Ho & Meei-Hsiang Ku-Goto, State Deregulation and Medicare Costs for Acute Cardiac Care, 70(2)
Med. Care Res. & Rev. 201 (2013) (“Removal of CON regulations is also associated with lower Medicare
reimbursements pre patient for both CABG and PCI.”).

UNITED STATES OF AMERICA
Federal Trade Commission
Washington, D.C. 20580
Office of the Commissioner
July 10, 2015
VIA EMAIL
The Honorable Marilyn W. Avila
North Carolina House of Representatives
2217 Legislative Building
16 W. Jones Street
Raleigh, NC 27601-1096
Dear Representative Avila,
I write to concur with the letter submitted today from the staff of the Federal Trade
Commission (“FTC” or “the Commission”) on North Carolina House Bill 200 and to clarify that,
while narrowing the application of North Carolina’s Certificate of Need (“CON”) law will
improve competition, I support the Commission’s longstanding position in favor of full repeal of
CON laws.1
1 E.g., Joint Statement of the Antitrust Division of the U.S. Department of Justice and the Federal Trade
Commission Before the Illinois Task Force on Health Planning Reform at 1-2 (Sept. 15, 2008) (“Together, we
support the repeal of [CON] laws, as well as steps that reduce their scope.”), available at
https://www.ftc.gov/policy/policy-actions/advocacy-filings/2008/09/ftc-and-department-justice-written-testimony-
illinois [hereinafter 2008 FTC-DOJ Joint Statement]; Prepared Statement of the Federal Trade Commission Before
Florida State Senate at 2 (April 2, 2008) (“[T]he Commission generally supports the repeal of [CON] laws as well as
steps . . . to reduce significantly the scope of CON laws.”), available at https://www.ftc.gov/policy/policy-
actions/advocacy-filings/2008/04/ftc-prepared-statement-florida-senate-concerning; Prepared Statement of the
Federal Trade Commission Before the Alaska House of Representatives Standing Committee on Health, Education
& Social Services at 1 (Feb. 15, 2008) (“The Commission believes that CON laws such as Alaska’s can be a barrier
to entry to the detriment of health care competition and health care consumers, and that the legislature should
consider their repeal.”), available at https://www.ftc.gov/policy/policy-actions/advocacy-filings/2008/02/ftc-written-
testimony-alaska-house-representatives; FTC Staff Statement Before North Carolina State Goals and Policy Board
at 1 (March 6, 1989) (“To promote competition in health care markets, the Federal Trade Commission and its staff
have been active both in antitrust enforcement and in advocacy of regulatory reforms, including advocating the
repeal of Certificate of Need regulation.”), available at https://www.ftc.gov/policy/policy-actions/advocacy-
filings/1989/03/ftc-staff-comment-north-carolina-state-goals-and; FTC Staff Comments Concerning Repeal of
Nebraska’s CON law at 1 (Feb. 22, 1989) (“While we believe the outright repeal of CON regulation proposed in LB
745 would likely best serve the interests of health care consumers, we believe that passage of either of the other
CON reform bills would likely also have significant positive effects on health care markets.”), available at
https://www.ftc.gov/policy/policy-actions/advocacy-filings/1989/02/ftc-staff-comment-hon-bernice-labedz-
concerning; FTC Staff Comments Concerning Repeal of Pennsylvania’s CON Law at 14 (Mar. 30, 1988) (“We
believe that the continued existence of CON regulation would be contrary to the interests of health care consumers
in Pennsylvania.”), available at https://www.ftc.gov/policy/policy-actions/advocacy-filings/1988/03/ftc-staff-
comment-hon-john-f-pressman-and-hon-donald; FTC Staff Comments Concerning the Effectiveness of Michigan’s
CON Law at 14 (Mar. 7, 1988) (“We believe that the continued existence of CON regulation would be contrary to
the interests of health care consumers in Michigan.”), available at https://www.ftc.gov/policy/policy-
actions/advocacy-filings/1988/03/ftc-staff-comment-hon-gerald-h-law-concerning; FTC Staff Comments
Concerning Reforms to Virginia’s CON Law at 1 (Aug. 6, 1987) (“[W]e believe that CON regulation is unlikely to

2
Regulatory barriers to entry in health care markets deprive consumers of the benefits of
competition. Competition in health care markets drives innovation, higher quality care, and
lower prices. Government intervention can undermine the ability of markets to deliver those
benefits to consumers. Recognizing this potential for consumer harm, the FTC has consistently
explained that full repeal of CON laws is likely to best serve the interests of health care
consumers. In a 2008 joint statement with the Department of Justice’s Antitrust Division
(“DOJ”), the FTC and DOJ called for the full repeal of state CON laws explaining that such laws
“undercut consumer choice, stifle innovation, and weaken markets’ ability to contain health care
costs.”2
I also write to expound upon the state of the empirical evidence on the effect of CON
laws.3 Basic economic theory, supported by a large body of empirical work, is unequivocal in its
teaching that regulatory barriers to entry are, in general, harmful to competition and consumers.4
Decades of empirical work are consistent with this view of state imposed regulatory barriers and
show they are likely to lead to higher prices, reduced consumer choice, and provide few if any
consumer benefits in terms of increased quality.5 As such, regulatory barriers to entry should be
avoided absent compelling empirical evidence demonstrating the regulation at issue will reduce
the harm to competition and consumers arising from an existing market failure or promote
another clearly articulated justification. To the extent regulatory barriers purport to pursue non-
economic goals, these goals are usually better achieved through other mechanisms that do not
impose substantial costs to competition and consumers.
The effectiveness of CON laws may be evaluated on many dimensions, including
whether they facilitate cost-reduction, increased quality, and improved access to care.
Unfortunately, most states, including North Carolina, do not have appropriate mechanisms to
track their progress in these areas. However, available empirical research shows that with
respect to cost-reduction, CON laws have generally failed to reduce costs and, in states with
benefit health care consumers in Virginia, and we support the complete elimination of CON regulation.”), available
at https://www.ftc.gov/policy/policy-actions/advocacy-filings/1987/08/ftc-staff-comment-virginia-commission-
medical; FTC Staff Comments Concerning Repeal of Hawaii’s CON Law at 1 (Mar. 13, 1987) (“[W]e strongly
encourage repeal of CON legislation.”), available at https://www.ftc.gov/policy/policy-actions/advocacy-
filings/1987/03/ftc-staff-comment-governor-mary-george-concerning.
2 2008 FTC-DOJ Joint Statement, supra note 1 at 1-2.
3 In its letter, FTC staff cites a 2014 study by Rosko & Mutter, which purports to find lower hospital cost-
inefficiency in CON states than non-CON states. While there are a number of serious problems with this study
(including its focus on capacity utilization without controlling for quality or access and that it rolls costs into a single
cost-frontier measure), perhaps most important is its questionable relevance to North Carolina given the study’s
failure to control for the significant differences among state CON laws and the fact that North Carolina CON law is
the fourth most restrictive in the United States. Christopher Koopman & Thomas Stratmann, Certificate-of-Need
Laws: Implications for North Carolina at 2-3 Figure 1 (Mercatus on Policy) (Feb. 2015), available at
http://mercatus.org/sites/default/files/Koopman-Certificate-of-Need-NC-MOP_1.pdf [hereinafter Koopman &
Stratmann].
4 See e.g., Harold Demsetz, Two Systems of Belief About Monopoly (1974), reprinted in E FFICIENCY, COMPETITION,
AND P OLICY Ch. 7 (Cambridge MA: Basil Blackwell, 1989); George Stigler, T HE O RGANIZATION OF I NDUSTRY
(Homewood, Ill.: Richard D. Irwin, 1968); Harold Demsetz, Why Regulate Utilities?, 11 J.L. & ECON. 55 (1968).
5 See e.g., Paul Joskow & Nancy Rose, The Effects of Economic Regulation in H ANDBOOK OF I NDUSTRIAL
O RGANIZATION II 1449 (R. Schmalensee & R. Willig, eds., North Holland, Amsterdam: Elsevier Science Publishers
B.V., 1989).

3
stringent CON laws, such as North Carolina, the stringency of the program is positively and
significantly related to hospital costs.6 In addition, CON laws are also correlated with fewer
hospital beds (131 fewer beds per 100,000 persons or approximately 12,900 fewer hospital beds
in North Carolina alone), as well as limitations on access to health care services such as MRIs (as
many as 49 fewer hospitals offering MRI services in North Carolina) and CT scans (as many as
67 fewer hospitals offering CT scans in North Carolina).7 CON laws also restrict the number of
cardiac facilities and are associated with 19.2% fewer percutaneous coronary interventions
(PCIs) per 1000 elderly, equivalent to 322,526 fewer PCIs for 1989-2002.8 Lastly, a recent
study focused on cardiac care found no evidence that CON laws are associated with higher
quality care and that repealing CON laws is associated with more providers statewide and lower
mean hospital volume for both coronary artery bypass graft (CABG) surgery and PCIs.9 In sum,
the available empirical evidence on the effects of CON laws indicate they are likely to harm
North Carolina consumers by reducing competition and decreasing access to and quality of care
without providing any offsetting benefit such as reducing health care costs.
In closing, I would like to emphasize that I support your efforts to narrow North
Carolina’s CON law, yet encourage you to consider full repeal to best serve the interests of
North Carolina’s health care consumers.
Sincerely,
Joshua D. Wright
Commissioner
6 E.g., Patrick A. Rivers, Myron D. Fottler & Jemima A. Frimpong, The Effects of Certificate of Need Regulation on
Hospital Costs, 36 J. H EALTH C ARE F IN. 1 (2010); see also The Effect of Certificate of Need Laws on Cost, Quality,
and Access (Georgia State University, Oct. 2006) (finding that rigorous CON regulation is associated with less
competitive markets and higher prices for private inpatient care); Report of Data Analyses to the Georgia
Commission on the Efficacy of the CON Program at 7-8 (Nov. 2006) (“Across all markets, states ranked as having
the most rigorous CON regulation (tier 2) have statistically significantly less competition than non-CON states”;
“CON regulation is associated with higher private inpatient costs” and the “effect is robust with respect to model
specification, measures of CON rigor, and diagnosis.”), available at
http://www.issuelab.org/resource/report_of_data_analyses_to_the_georgia_commission_on_the_efficacy_of_the_co
n_program.
7 Koopman & Stratmann, supra note 3 at 3; Thomas Stratmann & Jacob Russ, Do Certificate-of-Need Laws Increase
Indigent Care? (Mercatus Center at George Mason University, Working Paper No. 14-20, July 2014), available at
http://mercatus.org/sites/default/files/Stratmann-Certificate-of-Need.pdf.
8 Vivian Ho, Joseph S. Ross, Brahmajee K. Nallamothu, & Harlan M. Krumholz, Cardiac Certificate of Need
Regulations and the Availability and Use of Revascularization Services, 154 AMERICAN H EART J OURNAL 768 (Oct.
2007) (finding that each year between 1989-2002, the per capita number of hospitals performing CABG surgery and
PCI was higher in states without CON (e.g., 3.7 per 100,000 elderly for CABG, 4.5 for PCI in 2002), compared with
CON states (e.g., 2.5 for CABG, 3.0 for PCI in 2002)), available at
http://www.law.umich.edu/centersandprograms/lawandeconomics/workshops/Documents/Fall2010/ho.pdf.
9 Vivian Ho, Meei-Hsiang Ku-Goto, and James Jollis, Certificate of Need (CON) for Cadiac Care: Controversy
over the Contributions of CON, 44:2, Part I HSR: H EALTH SERVICES RESEARCH 483 (Apr. 2009), available at
http://www.law.umich.edu/centersandprograms/lawandeconomics/workshops/Documents/Fall2010/ho.pdf.