The South Carolina House Ways & Means Committee failed to move forward on a bill that would have abolished the state’s antiquated Certificate of Need (CON) laws, which give existing businesses a competitor’s veto to block new businesses.
In January, the bill passed the Senate with overwhelming support (35-6 vote) from both political parties, sparking hope that it would have similar luck in the House.
Governor Henry McMaster threw his support behind the proposed legislation, even writing a letter attacking the laws currently on the books.
“In the last few decades, we have seen the CON approval process become weaponized by those seeking to halt competitors’ entry into the marketplace through lawsuits and long-drawn-out litigation,” he wrote.
Unfortunately, these burdensome laws will continue to stifle competition and consumer access to quality services.
What is a Certificate of Need?
Certificates of Need are essentially permission slips to operate your business. But the permission slips aren’t given by a neutral party. Instead, they are doled out by boards filled with industry veterans who have a vested interest in blocking new competition and protecting their own businesses.
Think of it like a childhood lemonade stand.
Imagine you’re a child living on a block where another neighborhood kid has set up a lemonade stand, selling their refreshing lemony goodness to the neighbors on your street.
You decide that you not only want to get in on the action, but you believe you can offer people a better-tasting product at a lower cost. Not to mention, there is no lemonade stand a few blocks over, and those neighborhoods want lemonade too.
But the other kidtrepreneur stops you in your tracks, telling you that you aren’t allowed to set up shop without his permission. He wants to protect his own business, so he denies you permission because, according to him, there just isn’t a “need” in your neighborhood for another lemonade stand.
Any child can understand the injustice and absurdity of having to get approval from your competition before you can operate.
Yet, this is the unfortunate reality businesses are dealing with in 35 states and Washington, DC. But instead of childhood lemonade stands, these laws are impacting vital industries, like health care, where a lack of options doesn’t just impact consumer choice, it can be a matter of life and death.
An innocent life lost
In 2012, an expectant mother was rushed to a hospital in Salem, Virginia. She was 24 weeks pregnant and suffering from a condition called placenta abruption, which causes premature labor and can be fatal to both the infant and the mother.
The situation was dire. The physician on call at the time, Dr. John Harding, believed there was still time to save both lives, but he had to act now.
Just six miles away, in Roanoke, there was another hospital with a special unit that specialized in serving premature and ill newborns. The facility even had an ambulance specifically designed for the emergency care and transport of newborns in need of immediate care.
Dr. Harding rushed to the phone to arrange for the ambulance to come to assist the mother and baby before it was too late.
To his horror, the ambulance, the only one of its kind in the area, was out on a call several miles away. There was no way it was going to be able to get to Salem in time.
He recalled the agony he felt when he received this news.
“I had to go back in there and tell her it’s not coming.”
The doctors did whatever they could to save the pair of precious lives.
The mother pulled through. Her child did not.
Had the doctors had access to the same type of specialized neonatal facilities that the other hospital had, the baby may have had a fighting chance.
The lack of newborn-specific resources was not an oversight of the hospital, nor was it a unit they had no intention of building. Attempts had been made in 2010, but a government board, filled with individuals who had ties to well-established hospitals, denied the request to build the new facility. The board declared that there was no need for the new unit because another already existed a few towns over.
Even after this tragic incident, the request to build the facility was denied on the same grounds it had been denied before.
Dedicated to helping those who need it most, one would think these boards would be more concerned with protecting individuals instead of their own interests. But that rarely seems to be the case.
The competitor’s veto in Kentucky
Pacific Legal Foundation’s client Phillip Truesdell is the owner of Legacy Medical Transport, a non-emergency medical transport service based in Aberdeen, Ohio, that shuttles people between their homes and medical appointments or between hospitals.
Often, Legacy Medical Transport services people in Kentucky, just across the border.
But Kentucky CON laws prohibit Truesdell’s company from operating within the state’s borders. Under the law, Truesdell is allowed to take clients from Ohio to Kentucky, but he is legally forbidden from transporting them from Kentucky back to Ohio.
While some states at least try to pretend the CON laws exist to protect the health and safety of individuals, Kentucky’s CON laws don’t even shy away from their purpose.
The process of approval requires an application submission, which is then subject to a waiting period. During this time, established competitors are allowed to object to the application, which then prompts a hearing.
At this point, applicants must convince the government that there is a real need for their businesses. But this isn’t just a matter of explaining how additional services will be helpful to the area. No, the hearing requires applicants to prove that their need won’t harm the financial interests of existing businesses.
Truesdell’s application was denied, as is the norm for the majority of CON applications that are submitted in the state.
Unlike the Virginia infant ambulance, Truesdell’s services were for non-emergency services. But his clients still had a need. If they didn’t, Truesdell wouldn’t have had to expand his business from one to seven ambulances.
We are helping him fight for his right to earn a living and serve his clients who require care in Kentucky.
The right to freely compete
The Constitution protects individuals’ right to earn a living without being barred by absurd government laws.
Governments cannot use their regulatory authority to decide who is allowed to start a business, especially when their decisions typically benefit existing businesses.
Instead, they must ensure that all businesses are free to compete.
When more choice exists in the marketplace, the people benefit from having more quality options at competitive prices.
But it’s not just the livelihoods of the entrepreneurs that suffer. As with the newborn in Virginia, these laws also jeopardize human lives.
An opportunity lost
South Carolina had an opportunity to eliminate CON laws that have harmed so many across the country. Pacific Legal Foundation supported Americans for Prosperity’s efforts to get this potentially lifesaving bill passed, and we are disappointed to see the House fail to act.
Had the new amendment been adopted, CON requirements would be removed for hospitals with up to 50 beds in counties that don’t have a hospital, as well as removing additional barriers standing between patients and access to affordable, high-quality care.
While the news is more regrettable, Americans for Prosperity remains committed to working toward ending these regulations.
As the organization wrote in a letter:
“We will continue to push for the repeal of the burdensome red tape that holds doctors and providers back. We will also hold accountable those representatives that had an opportunity to vote in favor of Full Repeal on Tuesday in the Ad Hoc committee and those who failed to voice their opposition to the motion to adjourn debate in full committee today.”