North Carolina health systems are vying for a limited number of hospital beds to try to expand their reach and keep up with population growth.
Cone Health, Duke Health, Novant Health, Advocate Health and other North Carolina providers are pursuing acute care expansions. North Carolina, however, has a certificate of need law requiring the state to approve new healthcare projects based on access to care, competition and other factors. The law seeks to prevent oversaturation of services, potentially creating a set of health system winners and losers and limiting hospital capacity in one of the country's fastest growing states.
Related: How easing state oversight spurred a construction arms race
“North Carolina has seen significant economic and population growth, and the supply side of the equation is trying to keep up,” said Andy Snyder, partner and healthcare market leader at architecture firm NBBJ.
Here's what to know about hospital expansion and certificate of need requirements throughout North Carolina.
What’s driving health system expansion plans in North Carolina?
Health system executives say they don’t have the capacity to treat the state’s growing population, especially an increasing number of seniors with complex conditions. As a result, health systems across the state have submitted applications to the state to build hundreds of hospital beds.
North Carolina is on track to become the seventh largest state by the early 2030s, surpassing Georgia and Ohio, according to projections from the North Carolina Office of State Budget and Management. Nearly 1 in 5 Tar Heel State residents will be at least 65 years old by that time.
“Wake County is the second fastest growing county in the U.S. It is vastly underbedded. In general, we’re underbedded in our region,” Duke Health CEO Dr. Craig Albanese said in January at the J.P. Morgan Healthcare Conference. “There is insatiable demand for our services.”
Which health systems are trying to expand?
Nonprofit health systems across the state are trying to extend their reach and capacity, particularly organizations’ inpatient networks.
Greensboro-based Cone applied April 15 to build a $275 million, 46-bed hospital in Mebane, North Carolina. Cone was acquired in December by Risant Health, a nonprofit organization launched by Kaiser Permanente.
Durham-based Duke and Novant submitted a competing bid the same day to build a $225 million, 46-bed hospital in Mebane.
The health systems are competing for the 46 new inpatient beds regulators have approved in the Alamance service area. Statewide, regulators greenlit a total of 1,042 new acute care beds by 2027.
Each year, the North Carolina Division of Health Service Regulation determines how many beds are needed per market based on population growth, service utilization trends and access to care. Health systems can propose projects for some or all of the allocated beds, and competitors can oppose those projects and offer rival bids.
Winston-Salem-based Novant has also applied to build a $336 million, 50-bed hospital in Cabarrus County that Novant says in its Feb. 13 certificate of need application would offer a vital alternative to Atrium Health, the North Carolina division of Advocate.
Novant is squaring off with Charlotte-based Advocate, which looks to add 126 beds to its 457-bed hospital in Cabarrus County, as outlined in its Feb. 17 certificate of need application. The 126-bed addition would exhaust the entire state-sanctioned inpatient expansion in the Cabarrus area.
How do expansion proposals fit into providers' strategic goals?
North Carolina health systems hope to use these capital project proposals as a foundation for new offerings in underserved markets.
For instance, Duke and Novant are pursuing the Mebane hospital proposal as part of a new partnership. In March, the nonprofit health systems said they are working together to develop new locations across the state.
Aside from that partnership, Duke and UNC Health in January said they were working together to build a freestanding children's hospital in Piedmont.
Cone has invested about $200 million over the last several years in heart and vascular services, including an expanded heart and vascular center at Alamance Regional Medical Center. A Mebane hospital could support that cardiovascular service growth.
Novant has mapped out significant expansion plans over the next decade, hoping partnerships, new construction and acquisitions will transform the $10 billion system into a $30 billion organization.
"Many of the areas we serve are among the fastest growing in the country, and we are making infrastructure investments to grow alongside our communities – from expanding established facilities in our existing regions, to applying to build hospitals in new communities," a spokesperson said in a statement. "Certificate of need reform in the Carolinas creates a significant opportunity for us to provide more care in lower cost ambulatory surgery centers, and we are paying close attention to any additional changes in the certificate of need law as we plan for future facilities."
How is North Carolina’s certificate of need law changing?
North Carolina has eased certificate of need requirements for certain services such as psychiatric facilities, but not for acute care hospitals. However, new legislation and a pending federal court case may eliminate the law.
State policymakers are considering S.B. 370, a bill introduced in March that would repeal the certificate of need law. Similar bills have been introduced over the last several years but did not pass.
Also, a lawsuit challenging the constitutionality of the oversight process is winding its way through the courts. Dr. Jay Singleton, a North Carolina eye surgeon, filed the lawsuit in 2020, alleging he was unable to offer less expensive surgery at his office versus a nearby hospital because the certificate of need law prevented him from adding operating rooms to his practice.
These legal and legislative pushes will probably lead to a North Carolina certificate of need repeal, said Hamilton Espinosa, healthcare market leader for the construction firm DPR Construction.
“Certificate of need application costs have often kept smaller practices from expanding, and eliminating the law allows for a lower barrier to entry for individual or small groups of physicians to establish themselves or expand,” he said.
