COVID Might Help To Kill These Expensive, Anticompetitive Hospital Regulations in South Carolina

Residents of Fort Mill, South Carolina, had to wait 18 long years for construction to start on a hospital that state regulators determined in 2004 was necessary—and then proceeded to hold up in an absurdly long legal battle that eventually went all the way to the state Supreme Court.

It is hoped that this saga will never be repeated.

The state Senate voted 35–6 on Tuesday to repeal most of South Carolina’s Certificate of Need (CON) regulations that require hospitals and other health care providers to obtain permission from the state before expanding facilities, buying new equipment, or offering new services. These regulations often gave existing providers a de facto veto to stop new competition.

Fort Mill saw exactly that happen. There, plans to build a new 100-bed hospital took more than 10 years and half. ReasonPrevious reports.

Eighteen years without a hospital. Eighteen years without medical attention. Broken bones, ruptured spleens, heart attacks, births—all of it came and went,” state Sen. Michael Johnson (R–Fort Mill) told the Associated Press this week, after the bill passed with bipartisan support.

After lawmakers have finished working on the state budget, the CON repeal bill will be moved to the House.

South Carolina would no longer have CON regulations regarding health care facilities other than nursing homes if the Senate passed this bill.

The Charleston will be renamed to the Charleston bill if it becomes law. Post and Courier reports, it would clear the way for 28 projects that are currently tied up in legal battles despite having won preliminary CON approval. The state’s Department of Health and Environmental Control will also be reviewing the 34 other projects. According to the paper, these delayed projects amount to more than $1 million in state health care investments.

All those backlogged projects—and the time-consuming, expensive litigation associated with navigating the CON review process and inevitable lawsuits—nicely illustrate the often hidden costs of these rarely considered regulations.

The loss of projects which never came to fruition is not included in this figure. The Americans for Prosperity Foundation published a report that found 25 percent of South Carolina CON application were rejected or withheld within three years. This is a think tank advocating for the repeal of the CON. Those applications represented more than $450 million of investment in the state that never occurred—simply because regulators got in the way, or because competitors would have objected.

According to the report, even though the South Carolina Hospital Association President opposed the removal of CON laws, he admitted that it “doesn’t serve the community” after stating before the Legislature.

It was too evident for legislators to ignore due in part to COVID-19. In accordance with his March 2020 emergency order, Governor. Henry McMaster (R) suspended enforcement of CON regulations—making South Carolina one of several states to do so because of the pandemic. Candace Carroll from Americans for Prosperity, South Carolina’s state director, said that when it became clear that the sky was not falling, many state legislators began to wonder if they had ever been necessary.

“Government should never stand in the way of any South Carolinian receiving quality, affordable health care—especially during a global pandemic,” Carroll told Reason. “The Senate is now finished, and the House must finish by quickly sending the repeal bill to Governor to be signed.”

Previously, then-Gov. Nikki Haley previously tried to eliminate South Carolina’s CON laws but failed. In 2013, she used a line item veto to remove it from the state budget. The state Supreme Court in 2014 ruled that the regulations will remain valid after hospitals sued.

A major problem in times of crisis is artificially limiting access to health care. But CON laws are harmful for public health regardless of COVID-19. States with CON laws have higher mortality rates for patients with pneumonia, heart failure, and heart attacks, according to research published in 2016 by the Mercatus Center, a free market think tank that argues for repealing CON laws. Other studies show that CON laws contribute to health care shortages in rural areas because they force medical providers to focus on wealthier, more populated areas in order to make up for the added costs imposed by the CON process.

The federal government is ultimately to blame for the CON laws that litter state governments—though some, like South Carolina, are finally getting repealed. You can read more about it here. ReasonAs we have previously stated, CON laws were initially intended to reduce rising healthcare costs. They limit capital investment by hospitals as well as other providers of health care. Congress forced all states to pass CON laws regarding health care providers by 1974 in order for Medicaid funding to be continued. Congress repealed this mandate mid-1980s amid growing evidence CON laws weren’t helping to achieve that goal. It was too late.

With the exception of hospitals and other providers, most people agree that CON laws are bad policies. It is not easy to remove the inertia from state capitals, especially after such absurd situations like Fort Mill.

If the repeal bill becomes law, state Sen. Wes Climer (R–Rock Hill), who sponsored it, predicts it will unleash health care investment in South Carolina. He stated, “Now all that they need to do is.” The Post and Courier.“Raise the money to build it.”