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Some health care providers stuck in regulatory mess

Author: Bill Poovey

Source: GSA Business

November 17, 2014

The restart of South Carolina’s certificate of need program that oversees medical and health facility expansions and major equipment purchases is causing financial pain for dozens of providers.

During the state’s shutdown of the certificate of need program in the fiscal year ended June 30, the S.C. Department of Health and Environmental Control continued issuing operating licenses, mostly for home health providers. More than 70 providers who received licenses and expanded their operations or purchased equipment without justifying community need for the services now face the prospect of losing those investments.

“We’ve got a bunch of home health organizations, a lot of them are stuck out there in limbo not knowing what to do,” said S.C. Chamber of Commerce President Otis Rawl. “What we are trying to do is protect the assets that these home health organizations have invested in creating jobs and property taxes.”

Licenses issued during the program suspension without CONs were not based on need, and in some instances the state has determined there are already adequate services in those communities. Successful court challenges have forced Trident Medical Center in Charleston to give up a 14-bed expansion and Lexington Medical Center to shut down a catheterization lab and second heart surgery unit. Other hospitals issued licenses have been told they now have to get CONs for license renewal. To renew those licenses they will have to show a community need for the services and deal with any objections by competitors.

DHEC is sending letters advising providers to “please be aware that a renewal license may not be granted” without first obtaining a CON.

Rawl said the affected providers obtained licenses and acted based on DHEC previously telling them the CON program was finished.

“A bunch of them are not going to get their CON permit. That’s what’s at risk here,” Rawl said.

“All of a sudden they are left with investment in the ground that they can’t take advantage of.”

In April, the S.C. Supreme Court agreed with health providers who joined in challenging Gov. Nikki Haley’s veto of funding for the CON program. Haley contends the market should be open to competition and not subject to a government-administered program. The Republican governor said in issuing the veto of almost $2 million that she favors allowing “the market to work rather than politics.”

The Supreme Court decision has DHEC restarting the program with replacement employees and contracting out some of the work in the program started 43 years ago. CON is supposed to protect consumers against costly health program expansions and major equipment spending that duplicate existing services in a community.

S.C. lawmakers this year refused to approve legislation that would have exempted those licensees during the program shutdown from the CON requirement.

Reforming CON

Randy Lee, president of the S.C. Health Care Association, said several of its members got licenses for home health during the CON shutdown and are “in a tough situation” to get relicensed. He described the CON shutdown and restart as a “very confusing period.” Lee said patients of those programs if they do not get CONs “would be displaced. I’m sure everyone will always try to look at this in a way that will help those people being served. How it will be handled by the Legislature and how it will be handled by the courts is yet to be seen.”

Lee said the association will be very involved in developing any CON changes.

“I would hope some changes are made especially on expediting the CON process,” Lee said. “It takes too long.”

He said a pending case in York County is almost 10 years old.

S.C. Hospital Association Vice President Allan Stalvey said the CON program needs to be changed.

“One of the reform measures we are looking at is once you have received the certificate of need, you shouldn’t have to get another CON to expand that service,” he said.

Stalvey said the CON program “should apply to new hospitals and new ambulatory services and certain services” that are high volume.

He said one criticism of the CON program is “there is too much subjectivity.”

Rick McDuff, CEO at the Greenville office of Interim Healthcare, said they provide home health services to about 1,000 patients in the Upstate. He said the business has been providing service in Greenville, Spartanburg, Cherokee, Anderson, Pickens and Oconee counties for 35 years. DHEC in 2103 licensed an expansion into Abbeville, Laurens, Union and Greenwood counties.

McDuff said the company is providing service in the expanded area but has not yet made any capital investment due to the CON uncertainty.

“Unfortunately it was more of a political issue than a legal issue,” McDuff said of the CON shutdown.

He said there are home health operators “who have relied on the extended licensing.”

“There are some health agencies that are in litigation with DHEC,” he said. “We have chosen not to get in that fight; just sit back and see how the dusts settles.”

McDuff said Interim Healthcare has not received any notice from DHEC that a CON will be required to extend the license beyond June 30, 2015.

“I don’t know what they are going to require in terms of renewing the license,” he said.

Every two years the state health plan is drafted by a panel of mostly gubernatorial appointees and recommended to the DHEC board. That process is set to start in November, and the calculations of community need for health services could change.

Assessing need

In a proposed expansion that could become turf disputes in the Upstate, Greenville Health System trustees have voted to file certificate of need applications to open multispecialty, ambulatory care centers in Spartanburg and Anderson.

Malcolm Isley, vice president of strategic services at GHS, said in an email statement that “GHS is planning ambulatory centers for the market, including Anderson and Spartanburg, as part of our broader efforts to provide care to all of our patients in the most clinically appropriate setting that is both convenient and affordable.”

Isley said GHS “has a large patient base in each of these counties, and we’re simply bringing care closer to them. The fact that these patients are seeking GHS services outside of their home county indicates that there is a need or a demand for these services.”

He said GHS is “finalizing business plans and will make decisions about moving forward in the next several weeks. If our plans include services requiring a CON, we will comply with state CON laws.”

Executives at Spartanburg Regional Healthcare System and AnMed Health in Anderson declined comment about the GHS plans.

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