South Carolina Physicians Call for Market-Based Reforms

Published December 19, 2019

Member physicians are working to repeal the state’s Certificate of Need (CON) laws, develop ways to exempt physicians from having to sign “no compete” stipulations as a condition of employment, and amend the state’s tax code to allow a limited tax deduction for doctors who work with charities to provide free care to patients.

The CON repeal efforts have had the most success so far, says Marcelo Hochman, M.D., president of the Charleston County Medical Society and director of the Coalition to Repeal CON. In January 2019, lawmakers introduced H.B. 3823, which “eliminates references to CON requirements” and removes the language from the title of the existing State Certification of Need and Health Facility Licensure Act. The bill has 31 sponsors and is currently under consideration in a subcommittee.

The South Carolina Legislature’s 2019-2020 session resumes on January 7 and ends in May.

Unusually Restrictive CON

South Carolina has the ninth-most restrictive CON rules in the nation, according to the Mercatus Center.

“The law doesn’t do what it was intended to do but does what you’d expect it to do, and that is the people with CON approvals block newcomers into the market by contesting new applications, and the things that were supposed to happen—decreased cost, increased access, increased alternatives, increased charity care—all those things don’t happen,” said Hochman.

Hochman says five physicians have testified in support of H.B. 3823 so far and the state’s largest health care system, the Medical University of South Carolina (MUSC), appears to be in favor of the bill. However, the South Carolina Hospital Association, which includes MUSC, is  opposed to repeal and released another proposal that Hochman says “doesn’t really do anything.”

“Publicly, [all the hospitals] are taking this unified position against repeal,”said Hochman. “Privately, there are hospital systems that are not opposed to repealing. The state’s largest system—which has unmatched access to research dollars and benefits from the state’s strong credit rating, [so it] is unlikely to be impacted by CON repeal—has argued both sides.”

Hochman says physicians have met with Gov. Henry McMaster on CON repeal, but the governor has yet to take a position on the issue.

Getting the Public on Board

Hochman says it is important for the public to know CON reduces the quantity and quality of health care. His organization, the Coalition to Repeal CON, has set up a website explaining what CON is, how it affects people, and what can be done about it.

“South Carolina has an estimated 6,331 fewer hospital beds than needed, 10-19 fewer MRI facilities than needed and 33-44 fewer CT scanners than needed,” Hochman stated in a letter to the Charleston Post and Courier. “Rural patients travel farther for routine procedures and treatments, and urban patients are artificially limited to expensive, hospital-owned facilities.”

Hochman says CON laws have their worst effects on rural patients.

“It took one hospital in the northern part of the state ten years to get CON approval to open,” said Hochman. “During that time, people in that area didn’t have a hospital. Competitors get outspent and outlawyered very quickly.”

Even though CON approvals are often granted, the threat of CON challenges keeps competition and access down by discouraging attempts to enter the market, says Hochman.

“Few people have the ability to go through the process,” said Hochman.

Letting Doctors Compete

The SCMA is also backing an effort to exempt doctors from non-compete clauses as a condition of employment. Protecting physicians against non-competes is a tricky proposition in the state because the clauses are not upheld by statute but by case law, says Hochman.

“There is not a bill, like CON, that we can repeal,” said Hochman.

Non-compete clauses frequently prohibit doctors from seeing established patients at new places of employment, says Adam Habig, president and cofounder of Freedom Healthworks and a policy advisor to The Heartland Institute, which publishes Health Care News. Three states disallow them for all employees, and nine eliminate or curtail them for physicians.

“It is a relatively minor reform but faces resistance from entrenched interests,” said Habig.

“Contrary to the customary use of restrictive covenants to protect trade secrets or key customer relationships, physician non-compete clauses appear to be intended to lock physicians into long-term employment.”

Habig says his research shows some physicians have been prevented from even informing patients of their departure, let alone passing on future contact information.

Encouraging Charity Care

The other reform the SCMA supports is to give doctors a state tax deduction if they work with a charity organization to provide free care to the needy.

“It is a nonpartisan issue,” said Hochman. “Hospitals are incentivized to do charity care and get all sorts of money for ‘charity care’ which is not true charity care,” said Hochman. “It would increase charity care, which used to be a big part of medicine.”

Hochman says he is optimistic a bill will be introduced soon, and there is model legislation based on a similar proposal at the federal level. The bill would include provisions to prevent abuse, such as limiting the amount that could be deducted and mandating that care is provided through a recognized charity.

In addition, the state would be required to do an analysis on how such a deduction would affect the state budget, says Hochman.

AnneMarie Schieber ([email protected]is managing editor of Health Care News.