Belhaven Mayor Paul O'Neal was at the legislature Wednesday morning. Sen. Ralph Hise (R-Spruce Pine) stands to his right.
Belhaven Mayor Paul O'Neal was at the legislature Wednesday morning. Sen. Ralph Hise (R-Spruce Pine) stands to his right. Photo credit: Rose Hoban

A rural mayor wades into the ongoing argument over the state’s certificate of need program.

By Rose Hoban

In a press conference at the General Assembly Wednesday, Belhaven Mayor Paul O’Neal thumped the podium in frustration that Pungo Hospital, located in his town, remains closed after a year.

“This community needs a hospital,” he said. “I’ve walked to D.C. twice about it.”

O’Neal was in Raleigh speaking in support of lawmakers who would like to eliminate the state’s certificate of need laws, a complex suite of rules that help state regulators determine the distribution of hospital beds around North Carolina.

For months, Republican lawmakers in both chambers of the legislature have been calling for changes to the laws: Senate leader Phil Berger (R-Eden) has indicated his support for doing away with CON altogether.

Meanwhile, in the House, Rep. Marilyn Avila (R-Raleigh) has introduced a bill that would allow for the establishment of more freestanding ambulatory surgical centers separate from the state’s hospitals.

Now O’Neal, who has made two highly publicized walks to Washington, D.C. to raise awareness about the closure of Pungo Hospital, has jumped into the fray.

O’Neal’s complaint about CON was not as much about the existence of the regulations as about the fact that the state has asked for more information in granting a new certificate for a facility to replace Pungo.

“The head of the certificate of need people sat in a room with me, looked down his nose at me, and basically told me that we didn’t need a hospital,” O’Neal said. “Then he sent us a letter to ask us questions he already knew the answers to and sent it to the old hospital address, where he knew nobody was at.”

‘Antiquated system’

When certificate of need laws were established in the 1970s, they gave state oversight of the creation and distribution of health care facilities and services. The idea was to prevent the establishment of too many hospitals and hospital beds, which would create an incentive to keep those beds filled, thus driving up costs.

Belhaven Mayor Paul O'Neal was at the legislature Wednesday morning. Sen. Ralph Hise (R-Spruce Pine) stands to his right.
Belhaven Mayor Paul O’Neal was at the legislature Wednesday morning. Sen. Ralph Hise (R-Spruce Pine) stands to his right and Rep. Marilyn Avila (R-Raleigh) behind him. Photo credit: Rose Hoban

But in recent years, lawmakers have sought to do away with the certificate of need program, saying the application process is cumbersome and too expensive, and that having the system stifles competition.

Doctors in lucrative specialties, such as orthopedic or eye surgery, have pushed for elimination of CON. They’ve argued that they could provide the services for less in freestanding centers where there are no added hospital “facility fees.”

On the opposite side of the argument, hospital leaders worry that allowing those services to be offered by competitors would eliminate well-reimbursed programs that subsidize hospital loss leaders such as maternity and emergency care.

“We have an antiquated system,” said Sen. Tom Apodaca (R-Hendersonville), following O’Neal at the podium Wednesday morning.

“It’s not going to get any better if we just kick the can down the road. Every time we turn around, someone says, ‘Maybe in five years we can do this.’ Well, folks, it’s time to do it now.”

In search of a new certificate

“I would imagine what happened is when the most recent state medical facilities plan was approved by the governor, it was determined that there is already a saturation of beds in that area,” said Cody Hand of the North Carolina Hospital Association. “Not in that city or county, but in that area.”

He may well have a point. In the 1970s, when Pungo Hospital received its original certificate of need, Beaufort County, where Belhaven is located, and the two surrounding counties of Hyde and Washington had about 56,000 people. Now the state’s population has doubled, but the population of those three counties combined has only grown to about 66,000.

On top of that, the way doctors use hospitals has changed from the 1970s. Instead of filling beds overnight, most care is done on an outpatient basis, with few people staying in the dozens of beds that Pungo had a certificate of need for.

When Vidant Health came to Belhaven and took over Pungo in 2011, the place was running in the red. After managing the hospital for several years, Vidant, formerly University Health Systems of Eastern Carolina, decided to close it, arguing the hospital was hemorrhaging money.

“We tried to turn the hospital over to the town, but they wouldn’t accept it,” said Christine Mackie, a Vidant spokeswoman.

She also said Vidant pledged to build an urgent care center. And Vidant officials have pointed out that there’s a hospital in Washington County, about a half hour from Belhaven.

An artist's rendering of the new facility Vidant intends to build in Belhaven.
An artist’s rendering of the new facility Vidant intends to build in Belhaven. Image courtesy Vidant Health

But O’Neal said Wednesday that’s not good enough.

“Do you realize the winding, curving roads that are in rural North Carolina?” he asked. He also said at least one person has died waiting to be picked up by a helicopter.

Since Vidant announced the intention to close Pungo, the two sides have been at odds. They agreed to a federally mediated a consent decree in spring 2014, but the closure eventually proceeded last year. A lawsuit, fingerpointing and recriminations have followed.

“We’re building a $4.2 million multi-specialty clinic we’ll locate our physician practices to,” said Mackie. “It’ll be open 24/7 and will have a helicopter pad. That facility will open next summer.”

Charles Boyette, a local doctor and former mayor who accompanied O’Neal to Raleigh, was skeptical.

“Our Pungo District Hospital was one of the finest small community hospitals in the state,” he said mournfully.

The answer to Belhaven’s problems?

The Hospital Association’s Hand said his organization would like to see the CON process reformed to streamline applications and make it easier to transfer unused certificates from one hospital to another.

But he said eliminating the CON regimen wouldn’t necessarily solve Belhaven’s problems.

“We don’t have independent hospitals, or physicians clambering to open up practices or hospitals in rural areas,” he said. “If we want to avoid what the mayor of Belhaven talked about, which is the lack of access to care for those residents, we have to ensure that rural hospitals are viable and stable, which means they have to keep some of the services that they make a profit on.”

Belhaven officials say they want to reopen Pungo. O’Neal said they’ve gotten a loan from the U.S. Department of Agriculture and formed a not-for-profit holding company that’s raised about $800,000.

But first they need that certificate.

When contacted about O’Neal’s encounter with the head of the state’s CON office, Olivia James, a state Department of Health and Human Services press assistant, wrote that “more information than provided was required to determine if Pungo Hospital is an existing hospital and qualifies for the Certificate of Need exemption allowable under state law.”

“A list of requested information was provided to the Mayor of Belhaven. At this time, the information has not been received. When the information is received, we will expedite the review, consult with the Attorney General’s office and issue a decision.”

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