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Certificate-of-need laws make South Carolina one of the worst states for having babies

Sep 13, 2022 by Thomas Kimbrell

A recent report ranks South Carolina as the third worst state to have a baby.

The Palmetto State ranks:

  • 40th for infant mortality rate
  • 45th for the number of midwives and OB-GYNs per capita
  • 28th for cost of hospital Caesarean delivery
  • 25th for cost of hospital conventional delivery charges

A key driver of the problem is government red tape that creates artificial shortages for hospitals, obstetrics services, perinatal services, and intensive neonatal care.

These shortages stem from the state’s certificate of need law, which empowers government bureaucrats, rather than the market, to decide whether new health care services are needed and can have dire consequences for the health of mothers and babies.

How government bureaucrats use certificate of need’s arbitrary formulas to determine the need for health care

South Carolina’s State Health Plan is the regulatory document that uses arbitrary formulas to determine the “need” for health care in the state. Health care providers cannot apply to offer a service if the plan doesn’t establish a need for that service.

The plan’s analysis of the need for neonatal intensive care bassinets is just one example of how the certificate of need regime creates dangerous, artificial shortages of vital health care services.

The State Health Plan determined the need for neonatal intensive care bassinets is less than the neonatal mortality rate. According to the DHEC, the neonatal mortality rate in South Carolina is 4.5 deaths per 1,000 live births. Shockingly, DHEC calculates the need for neonatal intensive care at a rate of 3.25 bassinets per 1,000 live births.

The disparity is even more significant in minority communities. The infant mortality rate among non-white mothers is 7.5 deaths per 1,000 live births—2.3 times greater than the DHEC need calculation.

It gets worse: 94.5 infants per 1,000 live births are admitted to neonatal intensive care units (NICU). That means the actual NICU utilization rate is 30 times greater than the state-determined rate used to calculate the need for NICU beds.

More than 1,000 babies are born in the Palmetto State every week (the common denominator for the NICU need-determination and the neonatal mortality rate is 1,000 live births). Approximately 95 of those babies born each week will need intensive care. According to the March of Dimes, the average stay for infants admitted to special care nurseries is 13.2 days.

South Carolina has 147 total intensive care bassinets in the state. With 190 infants admitted to NICU every two weeks, who stay for an average of two weeks, it is easy to see how the state need-determinations dangerously limit hospitals’ NICU capacity.

Certificate-of-need laws rely on tricky math and produce tragic outcomes

DHEC plans perinatal care at the regional level. Only certain hospitals in each of the five perinatal care regions can add intensive care bassinets.

A close examination of the State Health Plan reveals that intensive care bassinets utilization rates are near or exceed 100 percent in three of the five perinatal care regions.

Americans for Prosperity Foundation’s analysis finds NICU utilization for perinatal care in Regions I, II, and III were 120%, 95%, and 99%, respectively.

However, the DHEC bizarrely includes intermediate care bassinets, which are not regulated under CON, to calculate neonatal care utilization rates for the respective perinatal care regions.

Doing so obscures the actual intensive care utilization rates, making the need appear less dire. For instance, by including unregulated intermediate care bassinets, DHEC reports the utilization of neonatal special care units in Region I as 65%, even though actual intensive bassinets utilization is 120%.

While the State Health Plan admits to “high utilization” and “overcrowding” of intensive and intermediate care bassinets in some areas of the state, their solution is not to adequately add bassinets but to transfer infants between facilities.

Virginia utilizes a similar strategy. There, the state twice denied LewisGale Medical Center’s applications to add NICU services to their campus in Salem. The state argued that NICU services at LewisGale were unnecessary because Carilion Clinic already offered NICU and transportation services at their nearby facility in Roanoke.

Then, in 2012, tragedy struck. A pregnant mother and baby were admitted to LewisGale in urgent need of NICU care, but specialized transport to the Carilion Clinic was unavailable. Despite doctors’ best efforts, the baby was lost because the state denied them the proper equipment to potentially save the child’s life.

The problem is not limited to neonatal care. South Carolina also has the 9th highest maternal mortality rate in the  nation. The March of Dimes classifies eight counties in South Carolina as maternity care deserts and lists 13 more as having low access to maternity care.

Certificate of need is poor public health policy

DHEC regulates obstetrics and neonatal services under the certificate-of-need law, which requires health care providers to gain approval from the state before opening new facilities, expanding services, or upgrading equipment — including installing OB beds and intensive care bassinets.

A growing body of research shows that certificate of need laws are associated with higher costs, less access, and lower quality health care. In practice, certificate of need is a scheme to protect incumbent care providers from competition by limiting the supply of health care in the state at the patients’ expense.

Last year, Americans for Prosperity Foundation published a report analyzing certificate-of-need applications submitted to DHEC from January 2018 to February 2021. The report found more than $455 million in health care investment was denied, withdrawn, or stuck in an appeals process.

South Carolina’s certificate-of need-regime pits providers against each other to fight for government favor.

Even after DHEC approves an application, competing providers can appeal DHEC’s decision and then litigate the issue. These legal challenges can delay the provision of much-needed health care facilities and services by decades.

For example, the state identified a need for a hospital in York County in 2004. However, legal wrangling in the state’s courts over who should be granted the certificate of need dragged on for 15 years. At long last, Piedmont Medical Center in Fort Mill is scheduled to open this fall (and will include obstetrics services), 18 years after the state determined a need for it.

Currently, two approved certificates of need for intensive care bassinets are stuck in appeals.

Summerville Medical Center and the Medical University of South Carolina each applied to add six intensive care bassinets.

Last year, DHEC approved both applications; however, both facilities filed legal challenges opposing DHEC’s decision to approve the other’s application. Meanwhile, parents who desperately need care for their babies wait in the lurch.

South Carolina’s certificate-of-need program fails to contain costs, ensure access, and improve the quality of health care. The NICU bassinet need-determination, especially, is an unnecessary policy failure that jeopardizes the lives and health of mothers and infants and drives up medical costs.

Thomas Kimbrell is an analyst at Americans for Prosperity Foundation. Parts of this article appeared in a FITSNews guest column on August 29, 2022.