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South Carolina’s certificate-of-need regime needs to go

Jul 16, 2020 by AFP

Late last month, South Carolina National Guard Adjutant General Van McCarty warned that the Palmetto State would need to begin rationing care if the state’s hospital capacity exceeds 80 percent in the coming months.

We’re nearing that ceiling now, with nearly 73 percent of the state’s hospital beds in use as providers work to keep up with an influx of COVID-19 cases. Lexington County is at 85 percent capacity on hospital beds. But keep this in mind: Of the 10,804 hospital beds in South Carolina, only 1,560 — 14.4 percent of the total — were occupied by COVID-19 patients as of July 15.

How did we get to this point?

No pros to CON

South Carolina is among the 35 states and the District of Columbia that have certificate-of-need laws, which intentionally limit the supply of clinics, medical equipment, hospital beds, and other care. The average number of services restricted by CON laws is 14; South Carolina limits over 20 medical services.

Though Governor Henry McMaster suspended parts of South Carolina’s CON law temporarily to help providers deal with the coronavirus, the law has left the state ill-prepared to fight the pandemic. And when it’s over, CON restrictions will continue to hurt patients.

The debate over South Carolina’s CON regime reignited last year after a report from the Department of Health and Human Services found that “evidence suggests that CON laws have failed to produce cost savings, higher quality health care, or greater access to care, whether in underserved communities or in underserved areas.”

A Mercatus Center study found that, without a CON law, Palmetto State residents would have access to 34 additional hospitals — including nine rural installations — 12 additional ambulatory surgery centers, over 300 more PET scanners, and over 20,000 more MRI machines.

The CON law also means 6,331 fewer hospital beds.

In some cases, CON law restrictions are a matter of life and death. Mercatus also estimated that, without CON, South Carolina would suffer 5.1 percent fewer deaths as a result of post-surgery complications.

CON serves special interests

Couldn’t South Carolina’s Department of Health and Environmental Control simply grant more approvals to health care providers and allow them to expand their services?

In theory, yes. In practice, no.

Any request to the state’s CON board for the expansion of services and the purchase of new equipment can be met with an objection filed by a competitor. Not only does this have the effect of discouraging potential applicants, the objection process has been used to shut down existing providers.

It’s a problem not unique to South Carolina.

In 2006, one hospital used the objection process to cow another hospital into withdrawing its application to open a facility where the two might have competed in Charleston, West Virginia. An urgent care clinic was shut down, also in West Virginia, as a result of CON’s objection process.

Most notable, Virginia’s CON law prevented a hospital from building an NICU that could have saved a newborn’s life in 2012.

The problem of monopolies

“The inherent problem is that [CON] restricts supply of these services because [providers] have to prove the need, and that’s why it’s called certificate of need … for your services, which really doesn’t happen in any other industry,” said Dr. Marcelo Hochman, president of the Charleston County Medical Society.

“The kicker is that the incumbents, who already have a certificate of need for that particular facility … can contest the application,” Hochman said. “So, that’s like Lowe’s telling Home Depot that they can’t build something across the street — and the reason they’d build across the street is because it benefits everybody.”

The federal government recognized the problem and scrapped its CON regime over 30 years ago.

The establishment of monopolies, in any industry, has predictable consequences, including higher prices, poorer service, and reduced access to care. Competition, on the other hand, encourages participants in the market to strive to better serve their customers.

Proponents of CON worry that, without the regulation, there would exist too many providers for too few patients. Nevertheless, every county in South Carolina is at least partly classified as a “health care shortage area” for primary care, according to RHI Hub, a resource and referral service for those attempting to access care in rural areas.

Repealing our state CON law would allow a rush of new providers to set up shop in South Carolina. That’s what happened in Florida, when the state repealed its CON for tertiary services and general hospitals last year. New hospitals are slated for construction and existing hospitals are considering expansion.

Tell your lawmakers to repeal CON

In the fight against COVID-19, South Carolina could have had thousands of additional hospital beds to care for COVID-19 patients.  Instead, with CON restrictions limiting innovation, South Carolina hospitals are nearing their breaking point.

Repealing CON now would not bring those beds to patients today. But it would help us prepare for the next health crisis — and for the everyday health care needs of patients in the future.

Tell your lawmakers to start that preparation today by repealing our CON law.