No more need for Certificate of Need? Lawmakers consider phasing out hospital-expansion rules

Roper St. Francis CEO David Dunlap

COLUMBIA — A complex set of health department rules that impacts nearly all aspects of the South Carolina hospital industry may be phased out over the next five years.

South Carolina hospitals have long supported the so-called Certificate of Need program that regulates health care expansion, but the industry’s chief lobbyist acknowledged Monday that a growing number of lawmakers seem eager to pass a bill eliminating the regulations by 2020.

“I think legislators are tired of dealing with (Certificate of Need),” said Allan Stalvey, the South Carolina Hospital Association lobbyist. “They have hard time understanding it, understanding the value of it.”

Stalvey said the hospital association board is scheduled to discuss its position Tuesday on a “sunset provision,” which would phase out Certificate of Need in five years. The House is expected to debate the bill this week.

“I’m not saying we oppose that right now,” he said. “Some (hospitals) are OK with repealing, some are not.”

Meanwhile, millions of dollars are at stake. Certificate of Need requires providers and hospitals to apply for permission from the state to buy equipment, expand facilities or open new ones. The rules are so complex, big hospital systems often try to tie up decisions in drawn-out lawsuits, keeping competitors from opening facilities or buying equipment.

Getting rid of the requirement assures everyone is treated equally, said Rep. Murrell Smith, R-Sumter, one of the bill’s sponsors. “We’re not going to pick winners and losers,” Smith said. “(Certificate of Need) is just being abused to prevent competition.”

Rep. Jim Merrill, R-Charleston, said he tried in a committee meeting last week to eliminate the regulation immediately, but didn’t succeed.

He called the bill and its five-year sunset provision “a smoke-and-mirrors maneuver to extend the life of (Certificate of Need).”

Merrill said he expects to hear arguments that rural hospitals would be unable to function without the protection Certificate of Need provides and that the state’s health care costs would increase without it.

“Those are outmoded ideas and red herrings,” Merrill said. “The only people who are benefitting from ... at this point are big-time hospital conglomerates and attorneys and a handful of lobbyists.”

The fight between two Charleston-area hospitals offers a good example why Certificate of Need has served lawyers and existing hospitals more so than the public, Merrill said. Roper St. Francis and Trident Health have been locked in a legal battle for years to determine which system, if not both, should be allowed to build a new hospital in Berkeley County.

Both hospital systems were granted the required Certificates of Need, but the court challenge has prevented either from moving forward.

Roper St. Francis CEO David Dunlap expressed concerns that eliminating Certificate of Need could undermine the “orderly construction of health care facilities” in the larger market.

“We are concerned that if (Certificate of Need) goes away that for-profit entrepreneurs will rush into this market to compete with full-service providers like Roper St. Francis that serve patients 24 hours a day,” Dunlap said in a statement.

In the meantime, the bill would also relax Certificate of Need rules. It would allow hospitals to expand services already approved under the program and remove the need to seek permission to buy costly equipment. Now, facilities must apply for permission to buy anything that costs more than $600,000 — approaching the cost of an average MRI scanner.

Certificate of Need was nearly killed in 2013 when Gov. Nikki Haley vetoed the program’s funding. But the state Supreme Court revived it, ruling lawmakers would have to vote to end it.

The Associated Press contributed to this report.