Could proposed WakeMed-Atrium deal become catalyst for broader hospital reform?

Rising healthcare costs are a concern for many North Carolina residents, including some members of the state legislature who are pushing a proposal that they say could help make care more affordable for consumers.

Their idea: repealing some of the state’s “certificate-of-need” laws, which regulate competition for healthcare services across the state. The proposal is sure to face strong opposition from the hospital industry, which has succeeded in killing similar efforts in the past. Supporters, however, hope this year could be different.

They’re seeking to channel political concerns around growing healthcare costs for state taxpayers — through Medicaid or the State Health Plan — as well for those on private health insurance. And they say a proposal for Raleigh-based WakeMed hospital to become part of a massive national hospital chain, run in part by Charlotte-based Atrium Health, will wind up raising costs for people on private insurance. Recent academic research shows hospital mergers and acquisitions tend to lead to higher prices.

“They're just going to raise prices, expand operating margin,” state Treasurer Brad Briner, who opposes the WakeMed-Atrium partnership, told WRAL in an interview earlier this month. “And ultimately, the patients will feel the brunt of that through higher prices.”

One possible way to combat rising health care costs could be finding cheaper ways to do surgeries. Supporters of repealing certificate-of-need laws say it’ll do exactly that.

"This is one piece of that puzzle that we've got to move forward, to help patients and consumers and constituents on the health care front for access and affordability," Wilmington Republican state Sen. Michael Lee, the Senate majority leader, said Wednesday as he introduced his proposal in a Senate committee.

Hospitals plan to stand in the way. A spokesperson for the North Carolina Healthcare Association, the state’s leading hospital lobbying group, told WRAL on Wednesday that some of the piecemeal certificate-of-need repeals passed in 2023 — as part of a broader deal to authorize Medicaid expansion in the state — are still so recent that it’s been impossible to analyze their impact, and therefore it would be premature to pass any new changes.

“It will take time and meaningful data to assess how those changes affect access to care, hospital stability, and the availability of patient services across communities,” said Stephanie Strickland, a spokeswoman for the hospital association. “Moving forward with additional changes before that impact is understood could create unnecessary risk and unintended consequences for patients and North Carolina’s broader healthcare system.”

But Senate Republicans are resolved to keep pushing for change.

"If we want to talk about costs and talk about saving dollars, this is a meaningful step that we can do to actually make that happen," Sen. Benton Sawrey, R-Johnston, said.

Under the certificate-of-need system, the healthcare system in North Carolina doesn’t operate in a free market. Rather, state officials decide how many hospital beds, or pieces of specific medical equipment, each county needs. Then doctors and hospitals fight over who gets to build those expansions or buy that equipment.

Supporters say the system is meant to prevent out-of-control spending and keep costs down. Critics say it has had the opposite effect, allowing hospitals to stomp out competition and hike prices as a result.

“It’s a Soviet-style practice of controlling supply,” Sen. Amy Galey, R-Alamance, said during Wednesday’s hearing. “And as the Soviet Union has fallen, I think CON should fall. We should tear down that wall.”

While hospitals have been mostly successful in killing efforts to repeal certificate-of-need laws, free-market advocates who favor reform hope this year could bring new political pressure to the fight.

There’s also looming legal pressure, after a state Supreme Court ruling in 2024 ordered a trial to determine whether the system is unconstitutional. Sen. Ralph Hise, R-Mitchell, said Wednesday he believes that courts will eventually strike down the certificate-of-need system as unconstitutional — and that hospitals should work now with the legislature to reform the system, rather than reacting after the fact to a potentially adverse court ruling.

“This is an opportunity to get involved, and to plan the end of the CON process,” Hise said.

Lee’s proposal, Senate Bill 1040, wouldn’t fully repeal the state’s certificate-of-need laws. It would target ambulatory surgical centers and inpatient rehabilitation facilities. That’s intended to make it easier for surgeons to do their work outside of hospitals and therefore avoid those hospitals charging the government, or insurance companies, facility fees — which can often reach into the tens of thousands of dollars per surgery.

Sawrey said Wednesday a main driver of costs for state healthcare spending has been the fees hospitals charge for in-patient surgery. Those fees have been rising so high, he said, that they’re now among the top drivers of higher Medicaid costs for state taxpayers year by year.

“This is something meaningful that we can do to save taxpayer dollars, to drive down health insurance premiums,” he said Wednesday.

In recent years, bills to fully or partially repeal certificate-of-need laws have consistently passed in the Republican-controlled state Senate, only to be shot down by the Republican-controlled state House. 

The hospital lobby spends heavily to fund politicians’ reelection campaigns, and the head of the North Carolina Healthcare Association is a former state House representative, Josh Dobson.

When Senate Republicans also tried pushing for a certificate-of-need repeal in 2025, which ultimately went nowhere, the NCHA wrote at the time that any changes would “threaten to increase instability across the healthcare market sector during a time of great uncertainty due to proposed cuts by the federal government to essential healthcare programs."