The NC General Assembly adopted a statute in 1978 referred to as the Certificate of Need law. Under this statute, a “certificate of need” (CON) must be obtained as a prerequisite to developing and offering a “new institutional health service.”  Such institutional health services include hospitals, of course, but also cover facilities such as nursing homes and ambulatory surgical centers. According to the NC DHHS website, the CON law “restricts unnecessary increases in health care costs and limits unnecessary health care services and facilities based on geographic, demographic, and economic considerations.”

Dr. Jay Singleton, an eye surgeon practicing in New Bern sought to open a surgical facility adjacent to his office. As things stood, it was necessary for Dr. Singleton to use an established surgical facility some miles down the road.  According to briefs filed in the case, the fee to use the already-existing facility alone was three times what a typical cataract surgery would cost in the proposed facility.

In 1973, the NC Supreme Court held a previous iteration of the CON law to be unconstitutional under the Law of the Land, emoluments, and monopolies clauses. A subsequently-adopted federal statute required that states adopt a CON law in order to be eligible for Medicare and Medicaid reimbursements, so a CON law very similar to the earlier law was adopted in 1978. When Congress repealed the CON law requirement in 1986, though, the NC CON law was left in place.  Dr. Singleton cited the same constitutional provisions on which the earlier CON law was invalidated.

The State claimed there was a presumption of validity for the CON law unless it could be shown that it was clearly irrational. This presumption is based on the “tiers of scrutiny” doctrine. That is, the body best positioned to strike the balance between individual liberty and the common good is the legislature for matters of ordinary economic activity. Where the economic activity involves health care services, the General Assembly has a particular interest in order to protect the public, and is thus owed deference, according to the DHHS lawyer.

The Court issued an order vacating the Court of Appeals ruling. It found that the Court of Appeals should have recognized that Dr. Singleton’s challenge was a facial challenge to the constitutionality of the CON law. A facial challenge is a claim that under no set of facts can the challenged law be constitutional. This is distinct from a challenge that as the law is applied to a claimant’s facts; it results in an unconstitutional outcome.  As a facial challenge, the case will now be heard by a three-judge panel, in accordance with a law passed by the General Assembly in 2013 that requires such challenges to be heard by panels appointed by the Chief Justice. Perhaps more importantly, the stricter standard for fundamental rights, as provided in Sections 19, 32, and 34 of the NC Constitution, will likely apply. We will stay tuned to see what comes next.