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Policy Tip Sheet: South Carolina Should End Disruptive Certificate of Need Laws

March 21, 2019

In this Policy Tip Sheet, Matthew Glans outlines the negative effects of certificate of need laws and why South Carolina should consider their repeal.

Problem

South Carolina is one of 35 states that institute certificate of need (CON) laws, which limit health care providers’ ability to expand services. CON programs require health care providers to receive state approval, generally from the state’s health care agency or a designated CON commission, to expand facilities and services. These artificial rules are one of the biggest hurdles blocking providers from adding new beds or building new, often badly needed, hospitals and nursing homes.

Under a CON law regime, states require a certificate of need for a wide variety of expenditures, such as facility construction and modification, new medical procedures offered, and increased inpatient care beds. States with CON programs regulate on average 14 different medical services, devices, and procedures. South Carolina regulates 22, much higher than the national average.

Policy Solution

South Carolina policymakers should consider rolling back these disruptive laws. Ideally, a full repeal of burdensome and unnecessary regulations such as CON laws should be applied across the board in South Carolina and in every other state, a move that would benefit all health care providers and their patients.

One such bill, H. 3823, is now being considered that would fully repeal the state’s CON laws. This would be a step in the right direction that would improve health care competition in the state, increase access to care, and lower costs.

A state profile of South Carolina’s CON laws conducted by the Mercatus Center, which relied on existing data from other states, estimates total health care spending could drop by $200 per person if CON laws were repealed.

In addition to lowering health care costs, eliminating South Carolina’s CON laws would improve health care quality and access.

According to the Mercatus study, if South Carolina did not have CON requirements, the Palmetto State would have 34 additional health care facilities, 12 additional ambulatory surgery centers, and nine rural hospitals. A study by Thomas Stratmann and David Wille of the Mercatus Center found that states with CON laws have a mortality rate about 5.5 percent higher than the average rate in non-CON states.

Policy Message

Point 1: CON laws have failed to improve health care access and have increased costs for consumers by hindering competition and forcing providers to use older facilities and equipment.

Point 2: States with CON programs regulate, on average, 14 different medical services, devices, and procedures. South Carolina regulates 22, much higher than the national average.

Point 3: States requiring CON for 10 or more services averaged per-capita health care costs 8 percent higher than states requiring CON on fewer than 10 services.

Point 4: CON laws give undue influence to competitors during vetting processes. When a health care company applies to enter a new market, competitors often use the CON process to block potential competition.

Point 5: States with CON laws have a mortality rate about 5.5 percent higher than the average rate in non-CON states.

Point 6: CON laws have not helped rural hospitals. CON programs have resulted in 30 percent fewer rural hospitals per 100,000 rural population,

 

Certificate of Need Laws: South Carolina State Profile
https://www.mercatus.org/system/files/south_carolina_state_profile.pdf
This state profile from the Mercatus Center examines South Carolina’s CON laws and compares health care outcomes and costs in other states. The studies attempt to give some insight into what is likely to happen if the state were to eliminate its CON laws.

Certificate of Need: State Health Laws and Programs
http://www.ncsl.org/research/health/con-certificate-of-need-state-laws.aspx
The National Conference of State Legislatures outlines the various state CON laws and the positions of CON law proponents and critics.

Certificate-of-Need Laws and Hospital Quality
https://www.heartland.org/publications-resources/publications/certificate-of-need-laws-and-hospital-quality
Thomas Stratmann and David Wille of the Mercatus Center at George Mason University challenge the claim CON laws improve hospital quality. “Using a broad dataset, the study finds no evidence that CON laws improve hospital quality. In fact, there are more deaths and serious postsurgery complications in hospitals in states with CON laws,” wrote Stratmann and Wille.

Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR