CERTIFICATE OF NEED LEGISLATIVE ANALYSIS

Healthcare
May 1, 2023

Effect of House 3M Committee Amendment (S.164)

In both 2022 and 2023, the South Carolina Senate under the leadership of Majority Leader Shane Massey, Medical Affairs Committee Chairman Danny Verdin, and Senators Wes Climer and Tom Davis sent the South Carolina House a bill fully repealing Certificate on Need (CON). Certificate of Need is the statute that requires the state (and often competitors) to approve a new healthcare facility or service before launch.

Now, the House 3M Committee has developed amendments to the original Senate CON Repeal bill (S.164). How did they do? This is our assessment.

Palmetto Promise Institute analysis finds that the House 3M Committee Amendment to S.164, Certificate of Need, would if signed into law make South Carolina’s 2023 CON reforms among the most significant in America since at least 2015.

  • These Certificate of Need reforms would far exceed the historic efforts of Tennessee (HB.948:2021) and Florida (HB.21:2019), and significantly outpace limited Georgia and North Carolina reforms. The 3M Amendment puts SC in the driver’s seat for greater access to healthcare for our people and attracting jobs and taxpayers to the Palmetto State versus our competitors in the Southeast.
  • The Senate has led the way on CON Repeal for over 2 years, but a case could be made that the 3M Amendment would be an improvement to the Senate-passed version.
  • The 3M Amendment does away with CON in between 68% and 95% cases immediately and in 100% of cases by January 1, 2027 (while exempting nursing homes, as is typical in other states).
  • Note: If amended and returned to the Senate, the “desire to be present” rule will not apply to bills returned from the House.

Compared to the Nation

Dr. Matthew D. Mitchell of West Virginia University (formerly of The Mercatus Center at George Mason University) is the foremost expert on the effects of Certificate of Need in the United States. He has testified repeatedly in South Carolina. He had this to say about the South Carolina House 3M Amendment:

“[Full enactment of the 3M Committee Amendment] would be the most-sweeping CON reform anywhere in the country in nearly a decade. Two years ago, Montana enacted a similar reform, eliminating every CON but that for nursing homes. The difference is that Montana only regulated 9 services and technologies at the time of its reform, whereas South Carolina has one of the most extensive programs in the country, requiring a CON for 18 different services and technologies. Only New Hampshire and Florida have come close since 2015.“ —Matthew D. Mitchell, PhD

Compared to Tennessee and Florida

Until the 3M Amendment, Florida was the gold standard and Tennessee was silver in the Southeast. Those efforts now look like half-measures. Tennessee (HB.948:2021) exempted certain facilities and certain activities from CON review. Florida (HB.21:2019) was more robust, eliminating much of CON in two stages like the 3M Amendment, but hospice programs (for example) still require a CON.

Compared to Georgia and North Carolina

Palmetto Promise Institute has been tracking legislative action in Georgia and North Carolina, our most formidable competitors in the Southeast for economic development and jobs.

  • North Carolina passed a weak CON reform combined with expansion of Medicaid for the able-bodied. The CON provisions of HB.76 (signed March 27, 2023) dribbled out a few CON carve-outs and raised a few CON thresholds over three years.
  • Georgia increased a few thresholds and placed limits on appeals (HB.186) but failed to significantly repeal CON in 2019 (HB.198). CON reform bills also failed in Georgia in 2022 (HB.1547) and in 2023 (four bills of varying impacts).

Compared to the Historic Senate Version

  • The SC Senate has boldly led the way on CON Repeal for well over two years. We would not be where we are today without the tireless efforts of Leader Massey, Chairman Verdin and Senators Climer and Davis.
  • The Senate version included desirable language protecting physicians from non-compete agreements. But legislative testimony raised the issue of a threat to the survival of the bill upon judicial review for failure to follow the “single subject rule” of the State Constitution (Article III, Section 17). Others argued contra. The House 3M version includes less of this language.
  • The Senate version takes effect immediately but limits the number of operating rooms allowed in Ambulatory Surgery Centers (ASCs). The 3M version has no ceilings (limits) on ASCs. South Carolina is dreadful in the presence of money-saving ASCs per capita (ranked #35 in ASCs per capita in the United States, below our rivals Georgia, Tennessee and Florida).

Projected Impact

Taking a step back for perspective, we can estimate the impact on 66 CON-required projects in play at DHEC as of December 31, 2021:

  • By our count, of Certificate of Need filings in Initial Processing at the Department of Health & Environmental Control, if the 3M Amendment to S.164 had been in place at that time, 87% would not have been required. All applications would have been unnecessary if the 3M Amendment had been fully implemented on that date.
  • Of Projects Under Appeal, 68% would have vanished if the 3M Amendment had been signed into law at that time. None would have required a CON if the 3M Amendment had been fully implemented on that date.
  • If calculated in percentage of capital projects and services for 2020-2022, the 3M Amendment eliminates 85% of CONs immediately and 95% of CONs on January 1, 2027.

Update: On May 3, 2023, the House Amendment referenced here passed, and the Senate subsequently concurred with the House version. The Governor signed the repeal bill two weeks later. Passage of S.164 vaulted South Carolina to the top of the list for the most significant repeal of Certificate in Need in 25 years in the United States.