Gov. Nikki Haley’s recent veto of funding for a state program that regulates requests to expand healthcare facilities or add services or equipment has put the health care industry in limbo until the path forward is determined by the courts.
In a statement, Haley called the certificate of need program (CON) a “political obstacle to quality care” that “restricts access, drives down quality and drives up costs.” Her own experience with CON came while working as a fundraiser for the Lexington Medical Center Foundation, whose request for a heart surgery unit was rejected at that time.
Haley’s veto eliminated $1.7 million in funding designated for the Department of Health and Human Services to review requests and issue certificates of need, which are required by law before new medical facilities can be built or existing facilities expanded. The state House of Representatives upheld the veto.
DHEC then suspended the program for the coming fiscal year, prompting a wave of confusion that ultimately led the agency to file suit in an attempt to get direction from the S.C. Supreme Court on whether it must continue to regulate such activities – since the permits are still required by law – without the funding to do so.
Meanwhile, health care providers say the uncertainty keeps them from being able to make business decisions that will affect not just the next fiscal year, but also many years beyond.
DHEC Director Catherine Templeton argued the suspension is justified as her agency lacks the authority to carry out an unfunded mandate. She cited a 2011 S.C. Supreme Court decision that funds could not be used for their intended purpose if a veto is upheld by the Legislature. She also cited a 2010 case where the Attorney General found that the General Assembly’s refusal to fund an S.C. Human Affairs Commission relieved the commission of its obligation to carry it out.
She promised providers DHEC would not take action against facilities that undertake expansions during that time. There were CON requests for 33 projects worth about $85 million awaiting DHEC’s review or approval as of last month.
The resulting situation leaves two important questions: whether the veto supersedes the law and means hospitals can expand unfettered, and whether Templeton has the power to suspend the program.
As of press time, the Supreme Court had not indicated whether it would take up the case.
In 1998, DHEC was asked to review how a proviso in a legislative act that appropriated funds for Medicaid patient days affected Medical Home of Florence’s pending request for additional Medicaid beds. Douglas Bryant, the DHEC commissioner at the time, had deferred to the “legislative intent of the law,” and allowed the addition of additional beds without a CON. When another facility, Commander Health Care Facilities, challenged that decision in 2005, the court upheld DHEC’s decision because Commander could not prove it had been harmed.
According to the National Conference of State Legislatures (NCSL), 36 states have some type of CON requirement. States that don’t “still retain some mechanisms intended to regulate costs and duplication of services,” according to the NCSL website.
Michael Batchelor, CEO of Baptist Easley, said his hospital would continue to operate under the usual rules.
“I basically said to my board that we’re going to continue to follow the process, still submit the same paperwork,” he said. He expressed concern that the suspension of CONs would allow entities to start up and drive existing organizations out of business and then eventually raise costs for all. He said the current system provides checks and balances that ensure community needs are met, and met responsibly.
