NORTH CAROLINA — A Novant executive is the incoming chair of a powerful hospital lobby group seeking to maintain a law requiring state review to approve new healthcare facilities. An ongoing lawsuit is challenging the regulation’s constitutionality.
READ MORE: Former physician asks commissioners to hold Novant accountable to ‘five-star’ rating
North Carolina is among 35 states with a certificate of need law requiring healthcare providers receive state approval to build new facilities or purchase expensive equipment.
The North Carolina Department of Health and Human Services approves or rejects certificate of need applications after reviewing proposals’ necessity in a given area, its cost-effectiveness, and coordination with the surrounding healthcare system.
Supporters of the state’s certificate of need law argue it helps ensure communities receive optimal regional healthcare and avoid duplication of services.
Critics, including healthcare consultant Ann Kempski, contend the hospital industry has weaponized the law to entrench monopoly power.
She cited a recent case involving Novant Health, one of the largest hospital networks in the southeastern United States, to illustrate her point. An October KFF analysis found Novant controlled 96% of Wilmington’s hospital market in 2022, the most recent year with available data.
Novant Health competed against physician-owned Wilmington Health in certificate of need applications for cardiac catheterization equipment last year. DHHS determined only one facility in the area was needed in the area.
The agency awarded the CON to Novant in January due to its geographic accessibility, broader range of services, and higher number of Medicaid recipients. In its comparative review, DHHS determined Wilmington Health would provide superior patient access to lower cost treatment and increase competition in the area.
“We respect the CON process,” A Novant spokesperson told Port City Daily, adding they did not have additional comment.
The applications show Novant projected to carry out 763 cardiac cath procedures by its third year of operation versus 843 procedures carried out by Wilmington Health. Novant’s average net revenue per procedure — $9,791 — was three times higher than Wilmington Health’s $3,215. While the lower revenue average may indicate lower costs to patients, DHHS noted, differences in the applicants’ proposed facilities and procedures could impact projected costs.
“This case is an example of how the certificate of need process is favoring the big, high-priced incumbents,” Kempski told Port City Daily. “And not offering an alternative to North Carolinians.”
New Bern ophthalmologist Jay Singleton filed a lawsuit against the DHHS in 2020 after it rejected his application to offer surgical services at his eye clinic. The physician argued he could provide services at a third of the cost of the local hospital and alleged the state’s certificate of need law violates the state constitution’s anti-monopoly provisions.
CON laws were originally established as part of a national campaign to safeguard the viability of taxpayer-funded hospitals in the 1960s and 1970s, the lawsuit states, but have instead shielded major providers from competition, increased costs, and reduced patient access.
“Given the scarcity of new ‘need’ determinations and the adversarial nature of these proceedings,” Singleton’s attorneys wrote, “qualified providers are forced to aggressively compete with one another — not in the marketplace, but in the CON-application process. Competitive reviews and contested cases are extremely common, often require the assistance of experienced legal counsel to litigate effectively, and can take many years and hundreds of thousands of dollars to resolve.”
In October, the State Supreme Court unanimously found Singleton’s allegations could render the certificate of need law unconstitutional. The justices ordered the case go before a three-judge panel for further review.
State Treasurer Dale Folwell, who filed a brief in support of Singleton, applauded the State Supreme Court’s decision.
“CON laws are exactly what they sound like – a con,” he wrote in a statement. “Every year the hospital cartel, through the North Carolina Healthcare Association, prevents any meaningful change to CON laws. Now, we have an opportunity for the courts to finally recognize that these laws are unconstitutional.”
The state’s most prominent hospital lobby group, the North Carolina Healthcare Association, cites certificate of need law among its top 2025 legislative priorities. The hospital association opposes any changes to the current law and argues it ensures healthcare services are the appropriate size for communities.
“The law ensures access to care for medically underserved populations and prevents oversupply that can lead to higher healthcare costs for patients,” NCHA wrote in a 2024 brief. “North Carolina’s robust annual planning process ensures need methodologies are continuously improved and meet the needs for North Carolina’s growing population.”
The North Carolina Healthcare Association has paid $2.7 million for state lobbying efforts since 2020, according to secretary of state records.
Novant Executive Vice President Frank Emory Jr. is chair-elect of the North Carolina Healthcare Association. Novant chief operating officer John Gizdic was the lobby group’s chair from 2021 to 2022.
Gizdic was formerly president of New Hanover Regional Medical Center before its 2021 sale to Novant; he then became a Novant executive vice president once the sale was finalized. His compensation doubled from a little over $1 million as NHRMC CEO in 2020 to almost $2.5 million as a Novant executive in 2022.
Novant reported spending a total of $532,163 on lobbying activities in its 2022 tax filing, including $292,168 in membership dues and $187,495 for direct contact with lawmakers and government officials.
The North Carolina Healthcare Association donated $298,800 to political committees in the 2024 election. Novant CEO Carl Armato has contributed a total of $16,050 to the NCHA PAC, Gizdic has donated $6,930, and Emory has given $3,250.
Tips or comments? Email journalist Peter Castagno at peter@localdailymedia.com.
Want to read more from PCD? Subscribe now and then sign up for our morning newsletter, Wilmington Wire, and get the headlines delivered to your inbox every morning.
