June 12, 2015

Certificate-of-Need Laws: Implications for South Carolina

Before the South Carolina Department of Health & Environmental Control
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June 12, 2015 

South Carolina Health Planning Committee Department of Health & Environmental Control
2600 Bull Street
Columbia, SC 29201 

Dear Committee Members: 

Thank you for the opportunity to provide some comments regarding South Carolina’s Health Plan and Certificate of Need (CON) program. The Project for the Study of American Capitalism at the Mercatus Center at George Mason University is dedicated to advancing knowledge about the effects of government- granted privilege on society. As part of its mission, the program conducts careful and independent analyses that employ economic and legal scholarship to assess legislation, regulation, and taxation from the perspective of the public interest. Therefore, this commentary does not represent the views of any particular affected party but is designed to assist your Committee as it explores these issues. 

Attached, please find a research brief by George Mason University economist and Mercatus Center Scholar Thomas Stratmann, Program Manager Mohamad Elbarasse, and me about the effects of CON regulations on the provision of health care services in the state of South Carolina. Our findings show that continued application of South Carolina’s CON program, and its restrictions on the provision of health care services within the state, limits the choices available for those seeking quality care. In particular, using the general findings from recent research by Thomas Stratmann and Jacob Russ,1 we estimate that continued application of the state’s CON program has reduced the provision of health care services in the following ways: 

  • Approximately 6,331 fewer hospital beds;
  • Between 10 and 19 fewer hospitals offering MRI services; and
  • Between 33 and 41 fewer hospitals offering CT scans. 

Moreover, while South Carolina’s CON program may have been initially intended to promote cost containment and increase care for the poor, recent research has demonstrated that these goals have never been achieved through CON regulations. There is little evidence to support the claim that certificates of need are an effective cost-control measure; and Stratmann and Russ have found that these programs have no effect on the level of charity care provided to the poor. While controlling health care costs and increasing care for the poor may be laudable public policy goals, the evidence strongly suggests that CON regulations are not an effective mechanism for achieving them. Instead, these programs simply decrease the supply and availability of health care services by limiting entry and competition. 

    Thank you for giving me the opportunity to provide comments regarding the history and effects of South Carolina’s CON regulations. As we note in the attached paper, this is an opportunity for policymakers in South Carolina to reverse course and open the health care market for greater entry, more competition, and ultimately greater choice for those seeking care. 

    Sincerely, 

    Christopher Koopman
    Research Fellow, Project for the Study of American Capitalism Mercatus Center at George Mason University 

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