Hospitals defend CON to combat ‘cream skimmers.’ What about ‘bottom dredgers’?

This week, the Wake County Board of Commissioners voted 5-2 to allow WakeMed to join the larger Atrium system. Much of the concern in the very long public comment period was that it would cause already high healthcare prices to increase. Often, when companies merge, I shrug, because if there is a free market in an industry, there is nothing stopping competitors from finding some new innovation or model to take down the giant, which has happened frequently in history. But when legal dynamics limit the market to a few giants and competition is successfully kept out, concerns about price increases after a merger hold much more weight.

And sadly, that accurately describes North Carolina’s hospital market, since the certificate-of-need system (CON) requires new entrants into the marketplace to receive approval from a government panel based on whether there is an existing need for that healthcare service in the community. Of course the existing hospitals in the area object to the newcomer and say they’ve already got it handled.

The NC Healthcare Association (formerly the NC Hospital Association) is the main defender of this system. On their website, they justify it by saying:

Hospitals and health systems depend on the state’s Certificate of Need law to enable them to provide essential services to their communities. As the safety net providers in their communities, hospitals and health systems use the funds earned in excess of cost in one service line to cover charity care and bad debt expenses for which they are not reimbursed. Those funds also support other services, like emergency care, that are reimbursed at less than cost to preserve access to care for everyone in their communities.

So basically, they need to dominate lucrative areas of medicine so they can make up for other areas where they operate at a loss. They specifically mention emergency care as an area they lose money.

Based on this reasoning, they object to “cream skimming,” where smaller providers move in and grab market share where they were earning “in excess of cost,” as they put it. CON is their tool to prevent this cream skimming, to gatekeep their money-making services.

With that in mind, it’s odd that there is also CON required in North Carolina for building an emergency facility. Of the 10 CONs granted in February of 2026, three of them — to UNC Health, NC Baptist Hospital, and Novant Health — were for freestanding emergency departments.

But why would there need to be a CON for emergency care facilities if these are more like bottom-dredging services than cream skimming, meaning these are services the hospitals say they lose money on?

You’d think allowing more freestanding emergency care facilities wouldn’t hurt the hospitals’ bottom-line, and may even help it. The same service performed in an ER can be around 10-times more expensive than when done in an urgent care. But ERs are open 24/7 and, due to the federal Emergency Medical Treatment & Labor Act (EMTALA), are required to accept anyone who walks through the door. So a lot of people, especially the uninsured and those on Medicaid, end up walking through the doors.

In addition to relieving some financial burden from hospitals, not requiring a CON for emergency facilities would allow more experimentation. One of those three freestanding emergency departments that was approved in February was UNC Health’s new emergency room and urgent care hybrid facility. They are the first in the state to pursue this model, though it is gaining popularity in other states.

UNC Health is partnering with Intuitive Health on the project. Intuitive now operates more than three dozen of these hybrid facilities across 13 states, with three in South Carolina and Tennessee soon to join them.

To avoiding having to give that expensive emergency care to those walking in with a cold or indigestion, Intuitive’s model pairs an urgent care with the emergency facility and creates a triage area that the patient enters first.

This way, the person with the cold can be sent to the urgent care and the person with the broken leg won’t have to wait in line as long. Their data shows that seven-in-10 who enter the hybrid facility end up being treated at the urgent care rather than the emergency room after triage. That saves everyone money without violating the rule to treat everyone where they enter.

Ideally, these kinds of innovations can make emergency care a profitable health service overall, and not one that is used to justify continuing our CON regime. But even if emergency care remains a drag on hospital finances, one would hope they’d put up less of a fight over “bottom-dredging” competitors than the alleged “cream skimming” ones.

David Larson is managing editor of Carolina Journal.