South Carolina opens its doors to new hospital investment

At a time when “bipartisan” might seem vanishingly rare, the word “unanimous” has become nearly unthinkable.

But on May 2nd the South Carolina House of Representatives unanimously passed legislation that will increase the number of hospital beds and services available to our residents. The bill, which sailed through the state Senate earlier this year, repeals Certificate of Need (CON) laws that require government approval to expand medical facilities and give competitors veto power over rival health care investments.

On its face this may look like a legislative layup: who could possibly object to fostering a surplus of available health care accommodations? But for decades this was the approach taken in dozens of states where existing health care entities and regulators could block or delay other health systems from investing in expansion or innovation. The coronavirus pandemic exposed this failed cost-cutting measure as a disaster for both patients and providers. We faced a dangerous shortage of ICU beds during COVID-19 surges. These crises made an already stressful job even more taxing on health care workers—the shortage of beds helped beget a shortage of nurses, doctors, and hospital staff.

The pandemic brought into focus the true costs of CON laws. From January 2018 to February 2021, South Carolina saw more than $455 million in proposed health care investments denied, blocked by litigation, or withdrawn—that represented 25% of all proposed investments, according to researchers. Academics from George Mason University’s Mercatus Center estimate that our state would have 34 additional hospitals, including nine in underserved rural areas, if it weren’t for CON regulations. And those who survive this process only succeed at considerable expense: one of our leading health care systems applied to expand hospital beds in 2004; construction did not begin until 2021 thanks to legal wrangling and a warped perception of serving the public health.

Thanks to the leadership in the South Carolina House, led by state Representatives Sylleste Davis and Mark Smith, as well as Senators Wes Climer and Tom Davis and Governor Henry McMaster, lawmakers on both sides recognized that now is the time to unleash medical investment, rather than to continue tying the hands of those seeking to improve care. The State Health Facility Licensure Act immediately repeals most statewide CON mandates. The bill also repeals CON for new hospital construction in eight of our counties that lack hospitals, and hospital relocations that occur within the same county—while granting a three-year sunset on CON for new hospital construction in the rest of the state. By the conclusion of the three-year sunset, the only medical service in South Carolina that will remain under our CON program will be nursing homes. It is our hope that during this three-year sunset period, our neighboring states will join us in passing similar legislation.

This bill will ensure that our residents have access to critical health care facilities and services. Gone are the days when doctors and administrators would have to pay thousands of dollars to add beds or install or upgrade medical imaging equipment such as mammogram machines in their offices. We have also made sure to safeguard the process over these next three years by instituting penalties for frivolous challenges designed to needlessly delay or block proposals.

We know that repealing CON can immediately expand patient access to care. Florida experienced a hospital construction and improvement boom after Governor Ron DeSantis did away with most of his state’s regulatory labyrinth in 2019. Hospital systems announced plans for 65 new hospitals between 2019 and 2022—more than triple the number of hospitals approved between 2016 and 2018; the new construction projects unveiled during the pandemic represented a 20% increase in the total number of hospitals in the state. The boom went beyond the hospital sector: companies also announced plans to build or improve 64 ambulatory surgery centers.

The legislation could not be timelier as we recognize National Mental Health Awareness Month. America is in the midst of a mental health crisis ranging from loneliness to increasing deaths of despair. For years, CON laws have encouraged investors to support mental health facilities in anti-competitive states so they can enjoy a competitive advantage over would-be rivals. With CON out of the way in South Carolina, residents here can expect more access to the mental health care they need.

With Governor McMaster, who championed the bill through both bodies of the legislature, having signed the repeal into law, South Carolina now joins 15 other states that actively help medical innovators improve patient outcomes and safety.

Despite our triumph over the status quo, thirty-four states and Washington, D.C. still have CON laws on the books. We hope that lawmakers in other states join us in fostering a health system that flourishes for everyone from investors and providers to patients, not just incumbent providers who are able to leverage a broken regulatory process.

Murrell Smith is Speaker of the South Carolina House of Representatives. Candace Carroll is state director of Americans for Prosperity-South Carolina.

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