A particularly repulsive violation of property rights is the saga brewing near my hometown in Clemmons, NC. This swirling storm of pragmatic tyranny and economic ignorance has now climaxed into a court hearing. My exposure to this silly soap opera is courtesy of my father, a Novant Health employee for over 30 years. Essentially the dispute revolves around bureaucrats and those cowards who leverage them, namely Baptist Hospital, forcefully violating the property rights of another private entity - Novant Health. Novant seeks to build a new community Hospital - Baptist and the bureaucrats object because Baptist wants to also build in the same region. Competition creates value, so this can only mean higher quality service for residents in the area right? Oh no, when you stir a giant pot of pragmatism with a collectivist stick, the only results are force and economic decay.
The political details of the dispute are irrelevant, so I won’t waste any time documenting them here. Here are the only relevant facts.
- Two hospitals are competing for the same geographic region.
- In any private endeavor, the individuals funding the venture stand to profit or lose their own resources.
- In a market free of coercion, consumers solicit the services which provide the most value.
- In a free country, property rights are sovereign and not to be trumped by the state - regardless of what collectivist tenet they scream.
In denial of all of the above facts, for some reason the State of North Carolina assumes the power to grant or deny growth in the Health Care industry. Through some magical analysis void of economic or moral merit they compute the sovereignty of property rights under the guise of a Certificate Of Need.
From the North Carolina Division of Health Service Regulation:
The North Carolina Certificate of Need Law prohibits health care providers from acquiring, replacing, or adding to their facilities and equipment, except in specified circumstances, without the prior approval of the Department of Health and Human Services. Prior approval is also required for the initiation of certain medical services. The law restricts unnecessary increases in health care costs and limits unnecessary health services and facilities based on geographic, demographic and economic considerations.
I must interrupt here. In a competitive market, free of external meddling, there would be no unnecessary increases nor services void of adequate demand. An unnecessary increase is an opportunity for a competitor to have an advantage. Businesses that aim to prosper avoid such mistakes. To the contrary, this law is directly responsible for unnecessary increases due to the fact that it stifles competition and inhibits the logical flow of capital.
The fundamental premise of the CON Law is that increasing health care costs may be controlled by governmental restrictions on the unnecessary duplication of medical facilities. To accomplish its purpose, the CON Law provides that “no person shall offer or develop a new institutional health service without first obtaining a certificate of need.” All new 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 must first obtain a CON before initiating development. In addition, a CON is required before any upgrading or expansion of existing health service facilities or services, which involves a capital expenditure above specified minimums.
Administration of the CON Law is entrusted to the Department of Health and Human Services. The Certificate of Need Section in the Department’s Division of Health Service Regulation is responsible for its implementation. Anyone desiring a certificate of need must apply to the CON Section, and furnish information upon which the Section can find that the application is consistent with specified “review criteria.” The Section may approve or deny an application outright, or it may approve the application with such conditions, as it finds necessary to bring the project into compliance with the mandated criteria.
Summary of the CON Process
The following narrative provides a brief summary of the CON process. Applicants and other interested persons should always refer to the applicable statute (G.S. 131E, Article 9, 175-190) and administrative rules (10A NCAC Subchapter 14C)for more complete information.
1. Allocation of Beds — At the beginning of each calendar year, a new State Medical Facilities Plan is published by the Medical Facilities Planning Section of DHSR which sets forth the maximum number of health service facility beds, by category, that may be awarded by the Certificate of Need Section (CONS).
2. Review Schedule — In order for competitive applications to be reviewed at the same time, the CONS has adopted a system to review applications according to a batched review schedule. Under this system, applications for similar services in the same geographic area are reviewed at the same time. Review schedules are found in the State Medical Facilities Plan.
3. Pre-Application Procedure — Each applicant submitting an application must submit a letter of intent (LOI) to the CONS no later than the date the application is due. Most applicants submit an LOI as the first step in the application process. In response to an LOI submitted before the beginning of the review period, the CONS forwards a letter to the applicant that indicates whether a CON review is required. If so, the CONS explains the category in which the application will be reviewed, provides the beginning review dates for that category and provides the necessary application forms. An applicant may meet with representatives of the CON Section for a pre-application conference to discuss any questions relative to the CON process and application forms.
4. Application Submittal — Applications must be received by 5:30 p.m. on the fifteenth day of the month immediately preceding the beginning of the applicable review period. In instances when the 15th day of the month falls on a weekend or holiday, the filing deadline is 5:30 p.m. on the next business day. The filing deadline is absolute. After an application is submitted it may not be amended, however, the CON Section may request that an applicant submit clarifying information. The CONS reviews each application to determine if it is complete. An application is deemed complete if the correct fee is paid and the original signature page is provided. If an application is deemed incomplete, within five days the CONS will notify the applicant of the items needed to make the application complete.
5. Public Comment Period — During the first 30 days of the review period, any person may file written comments or letters of support concerning the proposals under review.
6. Public Hearing — A public hearing is no longer required to be conducted for each proposal under review. However, under certain circumstances as set forth in G.S. 131E-185(a1)(2), a public hearing is required to be conducted by the CONS in the service area affected by the application no more than 20 days from the conclusion of the written comment period.
7. Application Review — The CONS has from 90 to 150 days to review an application for a certificate of need. Each application is reviewed against G.S. 131E-183 Review Criteria and any applicable criteria and standards in the administrative rules. All written comments and presentations at the public hearing are also taken into consideration by the CONS during the review of an application. An application must be conforming or conditionally conforming with all applicable criteria and standards in order to be approved.
8. Appeals of Decision — Within 30 days after the date of a decision any affected person may file a petition for a contested case hearing with the Office of Administrative Hearings (OAH). The administrative law judge must make his recommended decision to the Director of the Division of Health Service Regulation within 270 days after the petition is filed. The Director then makes the final agency decision, which may be appealed to the N.C. Court of Appeals.
9. Monitoring — After the certificate is issued, the CONS will monitor the development of the project through review of progress reports submitted by the applicant. In accordance with G.S. 131E-189, the CONS may withdraw a certificate if the holder of the certificate fails to develop and operate the service consistent with the representations made in the application or with any conditions the CONS placed on the certificate of need.
[emphasis mine]
In other words, property rights are subservient to some common good far superior than the rightful wishes of mere individuals, and derived from an intuition only possessed by the State.
From a moral standpoint this is an egregious perversion of justice. The purpose of Government is to protect individual rights, not to violate them. This law in its entirety is a blatant violation of property rights.
From an economic standpoint this is ridiculous nonsense. So what, if there is a hospital built on every block? The beauty of the free market is the just law of competition. The entity that provides the most value, which in this case could be comprised of any combination of innovation, technology, convenience, price or even the quality of the sheets on hospital beds, or the temperature in the rooms, will have rightfully earned the most market share. Any entity that can’t compete will cease to exist. If Novant and Baptist want to build Hospitals across the street from each other, as Forsyth Medical Center and WFUBMC virtually are, then the market will decide who prevails. A free market involves choices. Choices have consequences. A good choice profits, a poor choice destroys. These are two entities with vast financial resources, all of which can be lost with poor decisions. They are run by individuals who have proven to their superiors a knack for making intelligent business decisions. They have rightfully earned their resources. They are intelligent individuals with the right to utilize such resources as they see fit according to their reason. If they choose poorly, the market will punish them. If they choose intelligently, they and their customers will profit. If this is where and how they rightfully choose to utilize their property and resources, no entity has any moral right to intervene.
Are we to assume that the state (whose members have little to nothing at stake for incorrectly squashing Novant’s intent), through some unfathomable means, contends to know more about this particular market and the financial specifics than the qualified professionals at Novant (whose livelihoods depend on excellence) making the decisions?
When a right is violated, we may not be able to trace out in advance the destructive consequences that will come, but they are inevitable. This colossal waste of resources is a shining example. Novant Health, the entity that will either profit or fail on their own accord, can rightfully start a new business venture wherever they please. No bureaucratically endorsed “certificate” should be needed.
Laws and legal enforcement thereof should be based on rights. If an action doesn’t forcefully encroach on another’s right to life, liberty or property, or doesn’t objectively convey intent to do so, it shouldn’t be illegal. The biggest destroyer of personal freedom and economic prosperity are subjective laws - ones that ignore the above prescription.
To those who oppose Novant tell me this - Whose right to what is being forcefully violated by Novant starting this new venture? By what right does the State have any say in the matter?
To those who have said “If you don’t like it, fine change the law. Until that happens, then Novant has to obey the law just like everyone else.” How many lives are you willing to throw away waiting for an unjust law to change?
Novant should adamantly defend their unquestionable right to build where and how they please. They should dismiss CON laws as arbitrary and unjust violations of property rights. Any other defense is pragmatic and futile. With regards to Baptist - attempting to stifle competition by leveraging a bureaucracy beyond its proper scope is despicable. To do so in a scenario where lives are literally on the line is beyond contempt.
The purpose of a Hospital or related Health Care endeavor is to extend or enhance the lives of individuals. When entities compete to do exactly that the individual wins. Conversely, with every red-tape detour, every regulation, every “certificate” or any endeavor, other than health care, that these entities invest their resources in, the quality and value of their product is diminished. The end result is less care for a patient’s dollar. The same people pushing these senseless regulations in one conversation are the ones who’ll complain about the cost of health care in another - costs driven up by a meddling government in private affairs. The money wasted on this pathetic circus could have been invested in some valuable aspect of Novant’s business plan.
Rights violated, time and money wasted, political bickering interfering with innovation and productivity… sounds awfully familiar. Will we ever learn?