In some ways unsurprising given the amount of attention South Carolina’s Certificate of Necessity (“CON”) laws received during the last session of the General Assembly, but at the same time long overdue: the state agency responsible for administering CON laws (the South Carolina Department of Health and Environmental Control (DHEC)) is in the final stages of the regulatory process required to amend the CON regulations found in regulation 61-15 of the Carolina Code of Regulations The favorable wind that has certainly driven these first regulatory changes since 2012 also includes a relatively biting report issued by the Legislative Control Council (LAC) in February 2022 (find the DHEC CON review report here), as well as the near repeal of the CON program. As we explained in a previous post, the SC Senate passed a repeal law that subsequently failed in the SC House of Representatives, but only after intense debate. Now, DHEC has proposed the first substantive changes to Regulation 61-15 in over a decade, which have been approved by the DHEC board and posted for public comment until October 24, 2022.[1] The proposed changes appear to follow closely with a number of LAC recommendations and could go a long way to address many of the concerns voiced by program critics who have supported the Senate push for repeal.

This article provides an overview of the LAC report and recommendations. Perhaps most importantly, the LAC stated: “We did not conclude from this review that the CON program should be eliminated; however, our audit includes recommendations for improvement in several areas ”. In its report, the LAC provides specific recommendations for improvement, summarized below:

  1. Restrict the reach of regulated services by removing home health agencies and narcotic and opioid treatment programs from the CON review;
  2. Raise dollar thresholds for equipment and capital expenditures and anticipate future inflation indexation. The current thresholds were issued in 2001 and do not take inflation into account;
  3. Encourage DHEC to adequately respond to requests for waivers to the CON under the Governor’s COVID Executive Orders and properly track waivers issued;
  4. Adoption of quantitative qualitative metrics in the State Health Plan;
  5. Provide further standardization of information provided in CON applications to ensure consistency in DHEC’s assessment of applications;
  6. Request more details from applicants about the impact of a proposed project on net patient costs and include disclosure of non-capital expenditure related to a project upon its completion;
  7. The abbreviation of the contested proceedings at the Administrative Court and the request that the ALC appeals go directly to the SC Supreme Court, bypassing the SC Court of Appeal;
  8. Suggesting the General Assembly reform of CON laws to exclude low-cost facilities and equipment such as MRI[2] and outpatient surgery centers[3] from the CON revision;
  9. Suggesting to the General Assembly to consider the possibility of limiting the use of non-compete agreements in the health sector; And
  10. Assigning DHEC staff to annual review of the agency’s monitoring spreadsheet for issued CONs.

Before the LAC report was released in February 2022, on January 25, 2022 the South Carolina Senate voted 35 to 6 in favor of the S.290 bill, which completely repealed the CON program except for nursing homes. . The debate in the Senate was heavily centered on many of the issues subsequently highlighted by the LAC, with particular attention to the lengthy and costly appeal process of the CON and the impact of the CON on competition in the healthcare market. Many of the staunchest supporters of the repeal outside the Senate chamber during the debate were independent surgeons who expressed particular concern (objection) to the CON revision requirement for adding or expanding outpatient surgery facilities. Although there was generally consensus in the South Carolina Hospital industry to reform the CON program, such as raising the dollar thresholds for reviewing the CON on medical equipment and capital expenditures, as well as improving the appeals process to make it cheaper and more efficient, the wholesale repeal proposal mainly concerned the absence of a plan for the resulting unintended consequences. Upon arrival at South Carolina House, the S. 290 was referred to the Ways and Means Committee and a public hearing on the bill was held in which support for the S. 290 was primarily promoted by independent surgeons, while the leadership of the ‘hospital has largely encouraged House to take a more measured approach by reforming the CON program. With no apparent workable compromise within the health sector, S.290 remained on the Ways and Means committee when the 2022 session ended, resulting in the bill being defeated.

The disappearance of S.290 set the stage for DHEC’s current efforts to amend the CON 61-15 regulation. After a first round of public comments earlier this year, DHEC staff proposed a series of substantial amendments to 61-15 that the DHEC board adopted at its meeting on September 8, 2022. The board approved the amendments proposed for publication and public comment. Changes that the Board has approved and submitted for public comment include:

  • The definition of “data subject” now requires a person to “specifically state their grounds for objection” (Section 401), which serves as a clarification to current language that a data subject was only required to “specifically state their objection”. Emphasize the importance of including objection points in a letter to DHEC during the staff review.
  • There is now a definition of “controlling interest”, which reads: “Ownership interest in a company (corporation, limited liability company, partnership or other entity) with a sufficient number of voting shares or other interests to prevail in any motion . The majority of shares or interests with voting rights are always a controlling interest. “(Section 102 (4)) In the articles of association CON, the sale or transfer of a controlling interest or majority ownership in a company , partnership or other entity holding a Certificate of Necessity results in the transfer and cancellation of a CON.
  • In several places in the legislation, there is a new emphasis on “non-capital costs” which include consultancy fees and legal fees. There appears to be a new focus on disclosing these underlying CON-related costs, something suggested in the LAC report. In section 607 (3) (g), an applicant is now required to provide the Department with “a list of non-capital costs” as part of the final project completion report.
  • Section 104 (“Applicability”) proposes to change the threshold for a capital expenditure exceeding $ 5 million, a capital and the acquisition of medical equipment used for diagnosis or treatment if the total cost of the project is greater than $ 2 million.
  • Section 105 (Non-Applicability Determinations) now states that a non-applicability determination is valid for 18 months, rather than 12 months, from the date of issue. If proof of implementation is not submitted within 18 months of issuance, a new non-applicability request must be submitted.
  • The regulations regarding the components of the Application (Section 202) have been completely removed. Instead, section 301 now states “The application must be submitted using the web-based application available on the Department’s website or by other means that the Department may provide.” It is not clear why these are being removed and whether the electronic application will contain the same requirements.
  • Importantly, there will now only be one publication in the status register when a project has been “deemed complete” and there will no longer be an earlier publication than when a project is accepted for submission. This means that, unless a data subject sees a public notice in the newspaper (or online), the first time the public becomes aware of the DHEC review of a CON project is the day it was deemed complete. , that is, when the 15 days timer will start working for submitting a concurrent question and the 30 day timer will start running for submitting comments. This is quite a significant change and it will now be more important to monitor public alerts.
  • The design review criteria in section 802 that DHEC staff are required to consider when reviewing a CON application have been substantially condensed and cleaned up. Some of the lesser considered criteria have been removed or consolidated. Specific findings under Section 501 of DHEC for “New Institutional Health Services” were also removed. Of particular note is the addition of “Quality of Care” as a project review criterion.

The public comment period on the amendments proposed by the DHEC Board of Directors ended on 24 October and we now await the DHEC to publish the comments received. The DHEC board is expected to review public comments at its regularly scheduled meeting on December 8, 2022, at which time the DHEC board is likely to adopt final amendments and then be delivered to the South Carolina General Assembly for action. . If the General Assembly does not vote to approve or reject the proposed amendments within 120 days of receipt, the amendments will take effect.


[1] The state registry of June 24, 2022 is available on the South Carolina Legislature website: https://www.scstatehouse.gov/state_register.php.
[2] In particular, if dollar thresholds are raised for equipment as proposed, it is unlikely that projects that include the purchase of magnetic resonance imaging (MRI) equipment will be subject to review regardless. MRI is not a service for which standards exist in the South Carolina health plan, having been removed from the state health plan a few years ago, and therefore MRI equipment purchases were subject to CON review only when the total cost of the project was exceeded the dollar threshold for equipment (which has been $ 600,000 since 2001).
[3] Outpatient surgery facilities are a type of outpatient facility where same day surgeries are performed. Magnetic resonance imaging (MRI) equipment simultaneously

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