South Carolina — especially Horry County, home of Myrtle Beach — has a hospital bed problem. The city has long been one of the fastest growing in the country, but hospitals have not kept up. The state knows this; the Department of Health and Environmental Control (DHEC) published a report in 2020 explaining that Horry County would need to increase its bed capacity by about 20 percent before 2024. But these beds have not been built, and the shortfall has nothing to do with funding or the public interest. It has to do with South Carolina’s Certificate of Need law.
What are Certificate of Need (CON) Laws? In some industries, in some states, new businesses must apply for a license or “certificate” to prove that their service is “needed.” This is a long, tedious process. Whether a service is “needed” is left to state bureaucrats and the courts, who apply an arcane and complex legal standard. Worst of all, existing provider services — like other local hospitals — can block anything they don’t like and launch lengthy appeals if they don’t like the result. This process is wholly unrelated to health and safety concerns.
South Carolina’s CON law has directly undermined hospital expansion in and around Myrtle Beach. At least three new projects are planned and approved to expand hospital capacity in Horry county. However, all three are held up in litigation, as existing providers have filed appeals seeking to kill any expansion which might threaten them with the competition. Consumers are helpless as hospitals fight in court over the right to use the CON laws to crush their competition.
Common sense and basic economics tell us that CON laws harm consumers. Usually, when a community is short of something, a local business will step in to fill the gap. Almost anyone can set up a shop and sell cones or chairs if there is a demand for more ice cream or furniture in Myrtle Beach. Not so with industries covered by a CON law. This process crushes entrepreneurs who are just trying to make a living. But even worse, it increases prices and leads to shortages — a deadly consequence when hospital beds are at stake.
Evidence confirms that CON laws cost lives and money. Supporters of these laws argue that they improve quality and pricing by reducing competition. But proof and experts routinely agree that the CON process stifles consumer choice and permits competitors to veto each other’s projects for their gain. One 2017 study showed that states with CON laws have lower quality, less access, and higher prices than states without those laws. Even the federal government agrees: in 2016 when South Carolina was considering repealing its CON law, the Department of Justice and the Federal Trade Commission issued a joint statement reviewing the evidence and asserting that CON laws nationwide have not “succeeded in controlling costs or improving quality” and arguing that the state should go forward with the repeal.
CON laws are not only irrational; they are unconstitutional. Pacific Legal Foundation (PLF), a nonprofit law firm that defends Americans from government overreach and abuse, is litigating several cases seeking to overturn unjust CON laws across the country. For example, in Kentucky, PLF has sued on behalf of Legacy Medical Transport, seeking to strike down a law requiring a CON to operate a non-emergency medical transport company. And PLF is attempting to overturn Georgia and Iowa laws requiring CONs for freestanding birth centers. These cases show that established existing providers most often use CON laws to prevent small entrepreneurs from trying to serve their communities.
South Carolina will have yet another opportunity to fix its CON problem this year. Last year, a bill that would have unwound most CON requirements passed the South Carolina Senate, only to be killed in the House. In a letter to the House, Gov. McMaster compared CON requirements to rotary phones, arguing that they create monopolies in the healthcare market. But the holders of that monopoly — the large hospitals — will not budge and have called for “modernization” instead of repeal.
CON laws in the health care industry are a matter of life and death. These laws are, right now, keeping badly needed healthcare services from coming to South Carolina. Large existing providers like it this way — CON laws let them veto any competition they don’t like. The people of South Carolina have been paying the price for this competitor’s veto for years, but if legislators are determined, that can finally come to an end in 2023.
ABOUT THE AUTHOR …
Wilson Freeman is an attorney at Pacific Legal Foundation, a nonprofit legal organization that defends Americans’ liberties when threatened by government overreach and abuse.
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