Briner, SEANC support state Supreme Court review of CON dispute

State Treasurer Brad Briner and the State Employees Association of North Carolina are urging the state’s highest court to take another look at a six-year-old certificate-of-need dispute.

Briner and SEANC filed a joint friend-of-the-court brief Wednesday with the North Carolina Supreme Court. It arrived on the same day as a separate brief from the John Locke Foundation and University of North Carolina constitutional scholar John Orth.

Both briefs support Dr. Jay Singleton, the New Bern eye surgeon who has been challenging North Carolina’s CON law in court since 2020.

Singleton, working with lawyers from the Institute for Justice, filed paperwork in March asking the high court to take a second look at his case.

The certificate of need acts as a government permission slip. Health care providers need a CON before building hospitals and other facilities, adding beds, or purchasing the most expensive medical equipment.

Singleton argues that North Carolina’s CON law violates his state constitutional rights by preventing him from performing most eye surgeries at his Singleton Vision Center. He must send his patients instead to CarolinaEast, a hospital that holds the region’s only applicable CON. Singleton argues that his patients face much higher bills because of the state government regulation.

A unanimous state Supreme Court ruled in October 2024 that Singleton could move forward with his lawsuit against regulators with the North Carolina Department of Health and Human Services.

But a bipartisan three-judge trial court panel rejected Singleton’s CON law challenge last December. He filed a notice of appeal in January.

Now Singleton hopes to have the case moved from the North Carolina Court of Appeals back to the state Supreme Court.

“In theory, some argued, Certificate of Need laws would increase the accessibility, quality, and affordability of healthcare services,” lawyers representing the treasurer and state employees group wrote Wednesday. “However, rather than lowering healthcare costs and improving access to healthcare, the Certificate of Need law has had the opposite effect — it raises costs and diminishes access while effectively prohibiting new providers from entering the market.”

“Determining whether the Certificate of Need law runs afoul of the protections in North Carolina’s Constitution, as alleged by Plaintiffs, is an issue of significant public interest justifying this Court’s review,” the court filing continued.

“Moreover, although this Court explicitly instructed the trial court to consider this case in light of this Court’s recent jurisprudence on both the Fruits of Their Labor Clause … and the Law of the Land Clause, … the trial court failed to do so,” the brief argued. “Instead, the trial court relied on a Court of Appeals opinion that conflicts with this Court’s recent jurisprudence. Therefore, the trial court’s error need[s] to be corrected, and in so doing, this Court can also clarify the jurisprudence in this area of law. Accordingly, this case also presents legal principles of major significance to the jurisprudence of this State.”

Singleton filed paperwork in March asking the state Supreme Court to hear the case before it proceeds through the intermediate Appeals Court.

“The North Carolina Supreme Court has already granted discretionary review in this case once before,” Singleton’s lawyers wrote. “Plaintiffs-Appellants contend that their petition for discretionary review presents substantially the same questions on which the North Carolina Supreme Court previously granted review.”

“Since this case was filed six years ago, the parties have briefed and argued the same issues four times,” according to the Supreme Court petition. “Each fresh round has bought the CON law more time to violate North Carolinians’ rights. One more round in the Court of Appeals would not clarify matters. The last time the Court of Appeals decided this case, it only entrenched the constitutional issues on which this Court later granted review. Now that the procedural error has been corrected, this Court should grant review without delay to finally answer the important questions it took up before.”

The trial court panel announced its decision on Dec. 12, less than one month after lawyers for Singleton and DHHS argued about the CON law in a 2 ½-hour hearing in Raleigh.

“Having considered the motions, pleadings, other filings of record, all other competent evidence of record, briefs and arguments of counsel, and relevant case law, this Panel determines N.C.G.S. § 1181E-175 et seq to be facially constitutional,” according to an 11-page order from Superior Court Judges Jeffery Foster, Jacqueline Grant, and Troy Stafford.

Foster and Stafford are Republicans from Pitt and Iredell counties, respectively. Grant is a Democrat from Buncombe County. State Supreme Court Chief Justice Paul Newby assigned them to hear the case.

“Plaintiffs’ allege the CON Law, on its face, violates their economic liberty and right to earn a living in violation of Article I, Sections 1 and 19 of the North Carolina constitution,” the judges wrote.

“[T]o survive constitutional scrutiny under Sections 1 and 19, the challenged state action ‘must be reasonably necessary to promote the accomplishment of a public good, or to prevent the infliction of a public harm,’” the order explained. “This test involves a ‘twofold’ inquiry: ‘(1) is there a proper governmental purpose for the statute, and (2) are the means chosen to effect that purpose reasonable?’”

In a 2010 case called Hope – A Women’s Cancer Center v. State, the state Appeals Court “previously upheld a challenge to CON Law under Sections 1 and 19 of the North Carolina constitution, determining that the purpose of the CON Law was proper and means chosen were reasonable,” the judges wrote. “The Court of Appeals held that the ‘purpose in enacting the CON law was to protect the health and welfare of North Carolina Citizens by providing affordable access to necessary health care,’ and that purpose is ‘legitimate.’”

“Defendants’ motion to dismiss regarding Plaintiffs’ fruits of labor and law of the land claims is granted,” the panel added.

The judges rejected Singleton’s argument that the CON law provides a monopoly and “exclusive emolument” to CarolinaEast.  

“While it is true that nine operating rooms in the Craven, Jones, Pamlico service area are owned by one provider CarolinaEast patients in the service area have access to a total of 80 operating rooms owned by nine different providers in the service areas bordering the Craven, Jones, Pamlico service area,” the order explained. “Competition is not stifled, and individuals are free to choose from any of those nine providers.”

“Plaintiffs’ arguments focus on their own inability to open an operating room without a certificate of need, but those allegations taken as true do not demonstrate that the CON Law is invalid in all circumstances,” the judges wrote. “The existence of numerous healthcare providers who have obtained certificates of need statewide confirms that the law operates constitutionally in a wide range of applications. Plaintiffs fail to address how it is facially unconstitutional in these applications.”

“Considering the merits, Plaintiffs’ facial challenge to CON Law cannot overcome the high bar imposed by the presumption of constitutionally given to legislative acts,” the panel concluded.

Singleton’s lawyer responded to the Dec. 12 ruling. “In 2023, the North Carolina Supreme Court granted review in this case to resolve foundational questions about the North Carolina Constitution’s protections for the right to earn a living,” said Joshua Windham of the Institute for Justice in an email to Carolina Journal. “Last fall, the court sent us back down to the trial court to proceed through a three-judge panel because the allegations of our complaint, if proven, could render the CON law unconstitutional across the board.”

“We have now complied with that instruction. The three-judge panel appears to have largely adopted the government’s legal theories, which remain as wrong today as they have always been. We look forward to taking this fight back to the North Carolina Supreme Court, which we expect will treat the CON law with the genuine skepticism it deserves under the North Carolina Constitution,” Windham added.

The judges listened to arguments on both sides of the case on Nov. 18.

“He’s seeking the right to use his property in the way he wants,” Windham said in representing Singleton.

Derek Hunter, the state special deputy attorney general representing DHHS, responded that the CON law doesn’t block Singleton at all.

Health care providers need a CON to open an operating room. The law doesn’t apply to a “procedure room.” Singleton is “free to perform” any surgeries he likes in the procedure room in his existing facility, Hunter argued.

Windham labeled Hunter’s remarks about a “procedure room loophole” as an “11th-hour argument” that never emerged before as the dispute proceeded through North Carolina courts since 2020.

State regulators are making the argument now “to kick this case off the docket,” Windham argued. Accepting the loophole argument would prevent judges from addressing the issue of whether the CON law violates North Carolina’s constitutional ban on monopolies and exclusive privileges.

Windham “would be delighted” If DHHS would agree to a consent decree that Singleton could not face legal consequences or lose his license for performing a full range of surgeries at his office, the lawyer said. Windham didn’t expect the state to agree to that outcome, he added.

“Dr. Singleton’s claims have been summarily dismissed by every court that has heard the merits,” Hunter argued.

Judges must presume that the 1977 law is constitutional, Hunter added. “Plaintiff’s claim falls woefully short” of proving otherwise.

The North Carolina Supreme Court struck down a prior CON law in 1973 in a case called Aston Park. Hunter and Windham disagreed about the impact of that more than 50-year-old ruling.

DHHS believes Aston Park does not apply to the current CON law. The current law included extensive findings justifying the health care restrictions, Hunter argued.

“It does not matter if the findings of fact are true,” he said. “The question is whether the General Assembly believed they were reasonable.”

“Even if the findings are proven to be untrue, that doesn’t mean the plaintiffs prevail,” Hunter added.

It’s not the courts’ job to decide whether the General Assembly’s economic policy decisions are “bad or unwise,” he said.

Singleton’s lawyer responded that the current CON law violates the state constitution for the same reasons the high court identified in 1973. “It’s Aston Park 2.0,” Windham said.

State legislators who adopted the CON law in the 1970s “reasonably believed” that the law would help provide “safe, affordable access” to health care, Hunter argued. The law requires health care providers to acquire a CON from state government before building a hospital, add beds, open other types of health care facility, or even purchase the most expensive medical equipment.

“How do less services lead to lower costs?” Foster asked. “That’s contrary to basic rules of economics.”

Health care is “unlike any other market,” Hunter responded. “It’s unique.”

Singleton argues that the CON law forces him to send most patients to a nearby hospital, CarolinaEast, for surgeries. CarolinaEast holds the only CON in a three-county region for the affected services.

“Doesn’t that in effect give the hospital a monopoly?” Grant asked.

Windham labeled the CON law a “monopolist’s dream” later in the session.

Stafford compared Windham’s citation of the Aston Park precedent to a “sword” facing the state’s “shield” of the 2010 Hope case that upheld the current CON law.

Grant also responded to Hunter’s argument about the distinction between an operating room and a procedure room. “Why doesn’t everyone call it a procedure room to get around a CON?” she asked. “Is that a loophole?”

Foster suggested that the “real reason” for the CON law was hospitals’ concern that other providers would “cherry-pick” lucrative services while leaving them to treat patients who can’t afford to pay for services.

Grant questioned Windham on that issue, asking him to respond to the state’s argument that the CON law ensures health care for rural and underserved areas.

A unanimous state Supreme Court ruled in October 2024 that Singleton could move forward with his lawsuit. That decision reversed lower courts that had ruled against Singleton. In an unsigned unanimous four-page opinion, the court directed the case back to the trial level.

Justices said a trial court must take into account two unanimous state Supreme Court decisions. One dealt with claims that Kinston engaged in racial discrimination when choosing which city properties to condemn. The other involved Ace Speedway’s claim that state officials violated the Alamance County racetrack owners’ rights when targeting the track for a shutdown during the COVID-19 pandemic.

“Briner, SEANC support state Supreme Court review of CON dispute” was originally published on www.carolinajournal.com.