Legislative Audit Council will look at South Carolina’s Certificate of Need law

August 4, 2021

PPI Senior Fellow Oran Smith is interviewed in this article on the upcoming audit of South Carolina’s CON law.

(The Center Square) – The push to repeal South Carolina’s Certificate of Need (CON) statute took another step with the South Carolina Legislative Audit Council set to conduct an audit of the program, LAC Director Earle Powell confirmed.

The audit, which should begin in the next few weeks, comes after 13 South Carolina state senators signed a letter last month requesting a review, including Sen. Wes Climer, R-York, who sponsored legislation that would repeal CON regulations.

The letter also was signed by Senate President Harvey Peeler, R-Cherokee, Majority Leader Shane Massey, R-Edgefield, and Dick Harpootlian, D-Richland.

CON regulations are designed “to promote cost containment, prevent unnecessary duplication of health care facilities and services, guide the establishment of health facilities and services which will best serve public need and ensure high quality services are provided in health facilities in this State,” according to the South Carolina Department of Health and Environmental Control.

CON regulations limit what health care facilities can open and everything from the number of MRI machines in use to hospital beds available. During the COVID-19 pandemic, the hospital bed portion of CON was suspended.

“How does DHEC determine the point in which the duplication of health care facilities or services become ‘unnecessary’ duplication?” the senators’ letter asked. “Does DHEC solicit input from the general public and residents when making this determination? What justification is there for limiting the supply of services that cannot be overutilized like NICU beds or radiation therapy services?”

Palmetto Promise Senior Fellow Oran Smith, the think tank’s CON expert, hopes the audit will be conducted this fall and be ready for the 2022 legislative session.

“The people of South Carolina are hurting because there is less care available and it’s more expensive and there is even the question of quality as well,” Smith said. “One of the reasons for this is a provider of health care being forced to seek the approval of their competitors.”

The CON process timeline is another criticism of opponents, as the application process could delay the opening of medical facilities. Smith said one area where he does see CON regulations being effective would be in limiting the number of nursing home beds that are funded by Medicaid.

Lawmakers point out the administrations of the past two U.S. presidents have supported repealing CON laws.

“If there is an issue where you can have President Obama and President Trump in agreement on something, that tells you the idea probably has some merit,” Climer said last spring on the Senate floor. “To the best of my knowledge, the only entities in this state or in this country that oppose repealing the Certificate of Need are hospitals, and that is because the Certificate of Need erects barriers to competition. It allows them to operate as cartels. It allows them to charge higher prices, and it restricts access to much-needed health care.”

Smith said hospital consolidation also has caused more of the “monopoly” effect that can cause higher health care prices, citing the consolidation of Palmetto Health and the Greenville Health System in 2017 and other talks of hospital consolidation in the state.

“Monopolies tend to produce higher prices,” Smith said.