Health care industry scrambles to interpret S.C. Certificate of Need suspension

In this 2008 file photo, the final beam was hoisted into place at the East Cooper Regional Medical Center, which opened in 2010. Hospital construction is likely to surge since the state health department announced it has suspended its Certificate of Need program.

Brad Nettles

The state health department announced Friday it is temporarily suspending a program that regulates hospital expansion in South Carolina because there’s no money in the upcoming state budget to fund it, leaving industry insiders confused about what the announcement actually means for future projects.

Catherine Templeton, director of the S.C. Department of Health and Environmental Control, which administers the Certificate of Need program, wrote in a public letter that her agency is suspending it for one year because the governor and the Legislature decided to cut funding for it.

“DHEC has no independent authority to expend state funds for Certificate of Need, and therefore, the veto completely suspends the program for the upcoming fiscal year,” Templeton wrote.

Gov. Nikki Haley calls the program restrictive and praised the S.C. House of Representatives for backing her decision to veto it from the 2013-2014 fiscal year budget.

“This is not a novel idea — 14 other states don’t have Certificate of Need programs. We have long pushed for the removal of CON and we appreciate members of the House agreeing with us that it is time to change the statute and permanently rid our state of this political obstacle to quality care,” Haley said in a prepared statement.

Certificate of Need is a program used by the state government to regulate the number of hospitals and hospital beds around the state according to region and need.

In 1974, a federal law required all states to regulate new health care construction and technology investments. In 1987, When the government lifted that mandate, 14 states scrapped their Certificate of Need programs, according to the National Conference of State Legislatures.

Now, 36 states, including South Carolina, still maintain the program, which, at times, has proven contentious as hospitals vie to build new facilities. For example, Roper St. Francis Healthcare and Trident Health are locked in a legal battle to build a hospital in Berkeley County because the state initially granted both systems permission to build a facility there in 2009. Trident has argued that only one is needed.

Templeton’s decision to suspend the program for one year suggests that hospitals can expand without restriction through June 2014.

“Suspending the program has the practical effect of allowing new and expanding health care facilities to move forward without the Certificate of Need process,” she wrote.

But this decision does not abolish Certificate of Need permanently and the program’s future beyond next summer is unclear.

Dr. Pat Cawley, vice president of clinical operations and executive director of the Medical University Hospital Authority, said this uncertainty could make it difficult to secure funds for an expansion project.

“The law is still on the books, so, to me, it still leaves things in limbo and hospitals that want to do something that requires CON approval need to be cautious,” Cawley said. “This will have to sort itself out. I can’t help but see a lawsuit here.”

Doug Bowling, chief strategy office for Roper St. Francis Healthcare, agreed that Templeton’s decision will likely be challenged in court.

“Roper St. Francis will continue to evaluate the recent actions related to the suspension of the South Carolina Certificate of Need program and how it might impact our proposed hospital project at the Carnes Crossroads location in Berkeley County,” Bowling said.

A spokeswoman for Trident Health declined to comment on the announcement.

The S.C. Medical Association called Templeton’s statement “a shocker.”

“Right now it looks like it means that hospitals currently fighting over CONs to build new facilities can go ahead and break ground,” the association wrote in a press release. “It also looks like physicians who have wanted to build surgery centers or purchase new medical equipment can do so without anyone blocking them through the CON process.”

The suspension will not affect construction and licensing regulation, the medical association explained, but there are uncertainties that accompany this decision.

“There also could be some risk to activities conducted in the next year without CON, because although DHEC makes it clear in the letter that they do not intend to take enforcement actions, they leave future enforcement activity open should the General Assembly direct it to do so,” the statement explained.

The Certificate of Need program costs the state about $1.4 million a year. Rep. Brian White, R-Anderson, and Rep. Murrell Smith, R-Sumter, issued a joint statement on Friday explaining it was not the House of Representatives’ intention to abolish the program when it voted to sustain Haley’s veto.

“If the Governor and the agency director wish to unilaterally discontinue the program, as they have indicated, then that is a decision that lies exclusively within the executive branch and one which may be contrary to law but is certainly contrary to the will and intent of the House of Representatives,” the lawmakers said.

Reach Lauren Sausser at 937-5598.