S.C. certificate of need program could face legislative battle

When it comes to building a Fort Mill hospital, the competitors – Piedmont Medical Center and Carolinas HealthCare System – agree on two things:

▪ South Carolina needs to retain its certificate of need system, which requires state approval to build a new hospital.

▪ Each wants to be the organization to build in the community. .

Meanwhile, a potential showdown looms in the S.C. Legislature.

Last April, with a resounding 103-1 vote, the S.C. House passed a bill to end the state’s certificate of need program by Jan. 1, 2018. Gov. Nikki Haley also has called for an end to the program.

The House bill is before the Senate, where some members want to eliminate the “sunset” provision, keeping South Carolina as one of 36 states that regulate health care facility construction and expansion.

The Senate’s Medical Affairs subcommittee voted Wednesday to drop the sunset provision from the House bill. A vote on the subcommittee amendments by the full Senate could come as early as next week, said Sen. Raymond Cleary, R-Georgetown, chairman of the subcommittee.

If the amended bill is passed, Cleary said, there would likely be enough votes to get the revised bill placed on a list of contested Senate legislation. When the revised bill would come up for debate is uncertain as the Legislature’s top priorities this year will be roads and public education funding.

Cleary said if the bill isn’t amended, and is considered with the sunset provision, he isn’t sure there are enough votes in the Senate to move it forward. Without some changes, the House bill likely would languish in the Senate, Cleary said.

Allan Stalvey, executive vice president for advocacy and communications for the S.C. Hospital Association, said the certificate of need program “needs to be streamlined.”

Change, Stalvey said, doesn’t include the total elimination of the certificate process, which protects safety-net hospitals that deliver basic health care service to thousands in the state, as well as protects the quality of health care services.

He said it’s unfair to apply free-market rules to an industry where up to 60 percent of hospital revenue comes from federal or state sources – and those sources set the prices they pay.

Federal recommendations

Wednesday’s subcommittee meeting follows a letter from the Federal Trade Commission and the U.S. Department of Justice urging South Carolina to repeal its certificate of need laws. Haley requested an opinion on those laws from the federal agencies.

The two federal agencies said the certificate of need process creates barriers to entry and expansion of health care facilities and allows incumbent providers to “thwart or delay entry” of potential competitors. The process does not control costs or improve health care, the agencies said.

If the Legislature drops the certificate of need requirements, any health care provider could build a hospital in York County.

If lawmakers keep a certificate of need for major health care projects, the court fight between Piedmont Medical Center and Carolinas HealthCare System will continue. Attorneys for each hospital are finishing their filings with the S.C. Court of Appeals. Once they complete their filings the case will be scheduled by court officials.

Piedmont Medical Center and Carolinas HealthCare have battled for nearly 10 years for the right to build a hospital in the Fort Mill area. Their efforts have played out mostly at the state Department of Health and Environmental Control, the agency that issues certificates of need, and in court. The S.C. Administrative Law Court has ruled twice for Piedmont Medical Center and once for Carolinas HealthCare. The latest ruling gave the certificate to Piedmont Medical Center.

The Fort Mill hospital case, and one in Berkeley County, are often cited as reasons to change the certificate of need process. In Berkeley County, the S.C. Supreme Court declined to review a lower court decision that allowed Roper St. Francis and Trident Health to each build 50-bed hospitals in the county.

One reason the FTC and U.S. Department of Justice cited for eliminating the program was the time-consuming and costly approval process.

FTC Commissioner Julie Brill of North Carolina wrote a dissenting opinion to the FTC and U.S. Department of Justice letter. She said “repeal of CON (certificate of need) laws could squeeze safety-net hospitals with lower margins, making it plausible that repeal could compromise access to care.”

She recommended the S.C. Legislature modify its certificate of need laws “so they operate in less restrictive ways.”

This story was originally published January 13, 2016 at 8:53 PM with the headline "S.C. certificate of need program could face legislative battle."