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How the Certificate of Need program works

Health care just isn’t like other businesses.

“Health care is not a free market,” points out Julie Henry, of the North Carolina Hospital Association. “As long as we take care of everybody who walks through the door, any time they walk in the door we take care of them and there are others who don't have to do that, then it's not a free-market system.”

The costs can spiral out of control, when you are required to provide health care to whoever walks in your door – sometimes, very expensively and without the ability to pay you for it.

It was from that, that the federal and various state government developed the “Certificate of Need” program.

“It was a way to try to reign in health care costs,” says Katherine Restrepo, who studies health care policy at the John Locke Foundation.

The idea was to prevent waste and duplication, she says.

“If the state manages it, there'll be an equal amount of resources across the state, there'll be an equitable amount of access to health care, it's going to protect rural hospitals from closing,” says Restrepo. “But, in fact, it's produced the opposite result because it's an anti-competitive law.”

But Julie Henry goes back to the idea that hospitals aren’t supposed to be competitive, since they can’t choose who their customers are.

“Certificate of Need really causes you to stop and ask the question, is there a need for this?” says Henry. “If there's a need for it, then Certificate of Need is not an obstacle.”

The state’s various hospitals say getting rid of the Certificate of Need program, as 15 states have, would be a mistake.

“Right now, definitely, because hospitals and health systems are facing so many changes,” says Henry.

See more about how the program works in this edition of the Buckley Report.