Legislation Limiting Certificate of Need Introduced in South Carolina

Published March 24, 2015

South Carolina state Rep. Murrell Smith (R-Sumter) has introduced legislation to loosen the state’s certificate of need restrictions on the ability of health providers to build or open new health care facilities.

Smith’s bill would create several new exemptions, making it easier for new providers to add facilities.

The bill would exempt capital expenditures by health care facilities from certificate of need (CON) approval requirements if the funds are used to expand existing health services or those previously approved, as well as for new hospital beds.

Barton Swaim, communications director for the South Carolina Policy Council (SCPC), says Smith’s law is an important first step in bringing competition to the state’s health care marketplace.

“CON laws are like any other regulation; they are barriers to anyone wanting to enter the market,” Swaim said. “If a certain institution, say, offers lackluster service, in many cases that institution is protected from competition as long as a competitor can’t get a certificate.”

Swaim says there is little or no evidence CON laws have lowered the costs of medical care or improved access to it.

Little Evidence of Success

South Carolina’s CON laws require medical providers to obtain government approval before offering new services, expanding the size of a health care facility, or purchasing certain medical equipment costing more than $600,000.

According to the SCPC, there are currently a combined 20 different medical services and items of medical equipment that require CON approval in South Carolina.

South Carolina is one of 36 with CON laws, which were established with the expectation they would slow the rise of health care costs, in large part by limiting duplication of services and expensive technology. Research suggests CON laws have failed to achieve their goal.

A recent study for the Mercatus Center at George Mason University by professors Thomas Stratmann and Jacob Russ found CON laws not only raise the price of medical care by preventing new medical providers from competing with existing hospitals, but they also reduce the availability of medical equipment and hospital beds.

The authors found states with CON laws had 99 fewer hospital beds per 100,000 residents and lower availability of MRI services, CT scanners, and optical and virtual colonoscopies.

Other research has generally found similar results, and data from the Kaiser Family Foundation show health care costs are 11 percent higher in CON states than in non-CON states.

‘Corruption Waiting to Happen’

Swaim says he’s concerned about the inherent danger of corruption in the state’s CON system.

“In South Carolina, CON laws have placed more power in the hands of a few lawmakers,” Swaim said. “They exercise huge powers over state agencies like the one that administers the CON program … which means CON certificates tend to go to groups that know the right lawmakers. In a system lacking transparency like ours, CON laws are corruption waiting to happen.”

Gov. Nikki Haley (R) has announced her opposition to CON laws, and she vetoed funding to administer the program in July 2013, but her veto was overturned by the South Carolina Supreme Court in April 2014.

Others in South Carolina are pushing for the full repeal of CON, as opposed to Smith’s effort to create new exemptions. Vanessa Anderson, policy director for Americans for Prosperity–South Carolina, argued for full repeal in a letter to House Ways and Means Committee Chair Rep. Brian White (R-Anderson).

“Certificate of Need restricts access to health care, increases costs, and further complicates the bureaucratic maze that is Obamacare,” Anderson wrote. “It is neither compassionate, nor fair to demand that the most vulnerable pay out-of-control rates for procedures that could be done at a much lower cost.”

Swaim says he doubts a full repeal will be passed.

“In South Carolina, lawmakers rarely just get rid of pernicious laws or taxes,” Swaim said. “What they do instead is carve out exemptions for their friends, allies, or just whoever has the best lobbyist.”

Matthew Glans ([email protected]) is a senior policy analyst at The Heartland Institute.


Internet Info

“Do Certificate of Need Laws Increase Indigent Care?” Thomas Stratmann and Jacob Russ, Mercatus Center: https://heartland.org/policy-documents/do-certificate-need-laws-increase-indigent-care