The Banality of Red Tape: North Carolina Hospitals Barred From Buying PET Scanners

PET scanners are pretty cool. They give a
3-dimensional glimpse of the body’s internal processes, allowing
physicians to diagnose and observe the progress of health
conditions like cancer, heart disease, epilepsy, and Alzheimer’s.
Hospitals are known for wanting to diagnose such things, so it’s
not uncommon for them to purchase PET scanners.

But 19 states and the District of Columbia require health
providers to seek permission from state bureaucrats before buying a
PET scanner. Obtaining this permission can take years and cost
hundreds of thousands of dollars in application and attorney’s
fees—to say nothing of opportunity cost. After all that time and
expense, there is no guarantee that permission, in the form of a
“certificate of need,” will be forthcoming.

North Carolina is one such state that forces health providers to
submit to this kind of micromanagement. In May, two
Winston-Salem-based hospital systems filed PET scanner
applications. Wake Forest Baptist Medical Center already owns a
scanner and uses it for medical research—and needs permission to
convert it to clinical use. Novant Health meanwhile wants to build
a new cancer center. Applications denied.

From the
Triad Business Journal:

The state Division of Health Services Regulation rejected both
proposals, saying that while both properly identified the areas
that could benefit from the new scanner, there was not sufficient
need to justify the cost of either proposal.

The purchase of PET scanners and other high-dollar diagnostic
and treatment equipment is governed by the state’s certificate of
need law, which is designed to reduce the duplication of expensive
medical equipment in an attempt to control health care costs.

The law may be intended to reduce costs. But does it? The
evidence
suggests it does not. Many states have repealed their
certificate-of-need laws, but health expenditures have not
skyrocketed in those states, as certificate-of-need proponents
predicted.

Certificate-of-need rules do, however, keep regulators busy.
Each year, North Carolina health planners produce a state health
plan that purports to assess the need for PET scans, among other
services. This year, the planners divined that the Winston-Salem
area needed one more scanner, hence the two applications.

Novant and Wake Forest Baptist each argued that the other didn’t
really need a PET scanner. Apparently, they were both so convincing
that neither application was accepted. If they were located in any
of the over 30 states that do not restrict the purchase of PET
scanners, the two hospitals could focus on competing for customers
instead of competing for state favors. Alas, freedom does not reign
in North Carolina.   

Both providers may appeal the decision, but neither has
indicated if it plans to do so.

Click here for coverage of Virginia’s certificate-of-need
program, which limits access to CT scanners and potentially
lifesaving innovation.