Date Available
12-18-2025
Year of Publication
2025
Document Type
Graduate Capstone Project
Degree Name
Master of Public Financial Management
College
Graduate School
Department/School/Program
Public Administration
Faculty
Urton Anderson
Committee Member
Joseph Benitez
Faculty
Margaret Plattner
Abstract
Across North Carolina, many rural hospitals are facing closures, staffing shortages, and financial turmoil. Many hospitals, such as Morehead Hospital in Eden, NC (now UNC Rockingham), have utilized mergers with larger regional networks (e.g., UNC Health, Duke, Novant, Atrium) to stabilize operations and preserve local access to care. (deBruyn, 2017). However, even after successful integration efforts to bring some rural hospitals into larger regional networks, Certificate of Need laws in North Carolina are preventing these smaller, rural integrated hospitals from expanding their service offerings, thereby driving up healthcare expenditures for residents. As a result, patients experience longer-than-normal travel times and higher out-of-pocket costs for care. At the same time, integrated hospitals navigate a complex, conflictive regulatory process to expand their service offerings (Mitchell, 2024).
On the business side of this issue, regionalized health networks have a strong incentive to centralize high-margin medical services in urban centers with high patient volumes, more professionalized staffing, and greater name recognition. The acquisition of rural hospitals into a larger regional health network may be strategically designed to triage patients and provide lower-margin services to balance the economies of scale and limit service overflow in the larger, urban hospitals (O’Hanlon et al., 2019). These rural-regional integrations help expand the regional health network’s capacity to serve patients and establish reliable referral processes that connect rural hospitals and health facilities with larger suburban or urban hospitals. However, rural hospitals often struggle to obtain and retain human capital to maintain a higher caliber of service, such as 24/7 labor and delivery (obstetric care), emergency trauma centers, or burn centers. The need for human capital, alongside increased demand for service equipment, can complicate service expansion even when “need” is present in a given community. The battle between clinical capacity, the presence of human capital in the form of professional staff, market forces, and community access is, at its core, the central debate over the need to reform Certificate of Need laws in North Carolina.
Across the United States, Certificate of Need laws were designed to prevent unnecessary duplication of medical services in communities. Additionally, they were passed to increase access to healthcare by requiring communities to demonstrate and be evaluated on the “need for services” and lower healthcare costs in alignment with the U.S. Congress’s passage of the National Health Planning and Resources Development Act of 1974 (National Health Planning and Resources Development Act, 1974). However, Congress repealed the National Health Planning and Resources Development Act of 1974 in 1986 after establishing that mandated Certificate of Need laws failed in their intended purpose of containing costs and in their “anti-competitive” effects that protect incumbent providers over new entrants (US DOJ, 2008). Despite a federal repeal mandating the repeal of Certificate of Need laws, North Carolina maintained and expanded its Certificate of Need laws, which now rank as the fourth strictest in the nation (Koopman & Stratmann, 2015). Notably, the Certificate of Need laws in North Carolina have faced legal cases on their strict nature, as seen in Singleton et al. v. NCDHHS (2024).
This paper researches and recommends reforms to North Carolina’s Certificate of Need laws to provide insight on how legislators can continue to support rural hospital integrations into regional health networks while simultaneously promoting service expansions and ensuring fiscal stability. Using a qualitative research design, the study (1) examines state and federal statutes, (2) compares Certificate of Need laws in the neighboring states of South Carolina, Virginia, and Georgia, (3) reviews data on hospital closures and Medicaid’s expansion into rural communities and recent activities surrounding rural hospital integrations into larger regional networks, and (4) interviews a policy expert for context and background. Alongside this research, a Strength, Weaknesses, Opportunities, and Threats (SWOT) analysis was conducted on North Carolina’s current Certificate of Need laws and is compared alongside the researched states mentioned to provide three main recommendations: (1) a rural integration “fast-track” in the Certificate of Need obtainment process, (2) target limits on incumbency challenges in rural areas of significant distress, and (3) aligning state Medicaid expansion policy with integration efforts.
The analysis of North Carolina’s Certificate of Need law seeks to recommend modernizing Certificate of Need laws, not a full repeal. By making targeted reforms to existing Certificate of Need laws, we can reduce the administrative burden on rural-to-regional network integrations, secure access to essential medical services in rural communities, and maintain a steady balance between health care quality and cost control. Seeking to modernize Certificate of Need laws would help North Carolina find a middle ground that balances unguided free-market forces with overly restrictive regulations.
Recommended Citation
Fulk, Taylor, "Reforming Need: How Certificate of Need Laws in North Carolina Can Be Reformed to Promote Rural to Regional Health Network Integration" (2025). MPA/MPP/MPFM Capstone Projects. 468.
https://uknowledge.uky.edu/mpampp_etds/468
