Certificate of Need Legislative Updates for North Carolina, South Carolina, and Georgia

Certificate of Need (CON) has been part of the American healthcare system since New York instituted the first CON program in 1964. Over the next ten years, 22 states across the country passed CON legislation. In 1974, Congress passed the National Health Planning and Resources Development Act, which required states to adopt CON requirements to receive certain federal funds. [1] By 1982, all states but Louisiana had some form of CON law. Although the federal government repealed the CON mandate and associated federal funding in 1986, there are still over 30 states with a CON statute.

Support for repealing CON laws has gained momentum in recent years. During the COVID-19 pandemic 25 states loosened CON laws.[2] Since then, legislation has been introduced in several states to partially or completing repeal CON requirements. Some of these bills passed, and others inspired legislators in other states to introduce similar bills in 2024. This blog post summarizes recent legislative efforts in North Carolina, South Carolina, and Georgia.

North Carolina

During the 2023 legislative session, North Carolina passed House Bill 76 (now referred to as Session Law 2023-7 or Access to Healthcare Options). Although its primary purpose is Medicaid expansion, the law made several changes to North Carolina’s CON program. The bill expands Medicaid eligibility and thereby increases funding of acute care hospitals. The law also created the Health Access Stabilization Program (HASP) to fund hospitals.[3] The effective dates of some changes in CON regulations are tied to the timing of the initial HASP payment made on November 21, 2023. The table below describes changes in the CON program and the effective date of each change.

In addition to those outlined in the table above, several over changes went into effect on December 1, 2023. One, licensed home health agencies may offer early and periodic screening, diagnosis, and treatment services to children up to 21 years of age without CON review.[11] Two,

South Carolina

Senate bill 164 passed in the 2023 South Carolina legislative session and made major changes to the CON program. The bill renamed the “State Certification of Need and Health Facility Licensure Act” to the “State Health Facility Licensure Act.” Governor McMaster signed the bill into law on May 16, 2023. The bill removed CON requirements for all health care facilities in South Carolina, expect for nursing homes and hospitals. CON requirements for hospitals will end on January 1, 2027. The law also immediately changed CON exemptions, review criteria, deadlines, and other requirements for hospitals and nursing homes.

The law has these new exemptions to CON review:

• Relocations of licensed hospitals are exempt if the relocation: 1) occurs in the same county as the existing hospital, 2) previously issued CONs at the current location have been fulfilled 3) the proposed site must further health care delivery and innovation for South Carolina residents.
• Acquisition of an existing hospital by another person or health care facility.
• All crisis stabilization unit facilities.
• Construction of a new hospital with up to fifty beds in a county without a hospital.
• Hospitals owned and operated by the South Carolina Department of Mental Health and the South Carolina Department of Disabilities and Special Needs (except adding one or more beds to the total number of beds of the departments’ health care facilities existing on July 1, 1988).

All hospitals must obtain a written exemption from the Department of Health and Environmental Control (DHEC).

The new law did not change current review criteria but added a provision giving more consideration to timely access to health care services, patient choice, and the balance between competition and regulation. DHEC must in one year identify how it will incorporate these considerations into its CON review.

The bill shortened deadlines and time periods for DHEC and CON applicants. DHEC now has 15 days from the date the application is filed to ask for more information and a CON applicant has only 15 days to submit the additional information. Failure to meet these deadlines by the applicant will be considered withdrawal of the application. DHEC now cannot approve or deny a CON application earlier than 30 days or later than 90 days from the date affected people are notified an application is complete, unless a public hearing is requested. If a hearing is requested, the decision must be issued 120 days from the date the applicant is notified the application is complete.

The bill created a six-member CON Study committee. This committee was charged with observing the effect of CON repeal on the quality and quantity of access to healthcare in rural South Carolina. A report by the committee of its work, findings and recommendations is due by January 1, . The new law also changed permitted discovery, the appeals process and who pays attorney’s fees.

The bill changed licensing requirements for hospitals and ambulatory surgery centers (ASC). For hospitals, the law prohibits the use of economic criteria unrelated to quality of care or professional competency when considering initial or continuing hospital medical staff membership or privileges. For ASCs, new indigent/charity care requirements were added. Now, if an ASC provides care to Medicaid beneficiaries, it must provide uncompensated indigent/charity care to underinsured or medically indigent equal or than 2% of adjusted gross income. If an ASC does not provide care to Medicaid patients, it must provide uncompensated care equal or greater than 3% of adjusted gross income. Annual reports must be submitted by ASCs that show compliance. An ASC that fails to meet the new requirements will face monetary penalty equal to the difference between actual and required indigent/charity care.

Georgia

Seeing South Carolina’s drastic changes to its CON law, some Georgia legislators plan to introduce similar legislation during the 2024 legislative session. A report published in November 2023 by the Georgia Senate Committee on CON Reform recommended complete repeal of the state’s CON program. The committee argues the original rationale for the state’s CON law no longer exists and the CON program negatively affects the state’s healthcare system:

“Based upon the testimony, research presented, and information received, the (committee) has found that the problem which Georgia’s CON laws were intended to combat no longer exists. The CON process is used by market incumbents to prevent competition and deny patients the benefits therefrom. The CON laws prevent the citizens of Georgia from benefiting from advances in health care delivery, especially in rural communities.”[12]

RPC will monitor the upcoming legislative sessions in Georgia and other CON-active states. Stay tuned for more information on 2024 CON activity and changes.

[1] 40 Years of Certificate-of-Need Laws Across America | Mercatus Center

[2] Certificate-of-need laws: Where they stand and where they’re headed (beckersasc.com)

[3] Hospitals Across North Carolina Receive Payments as Part of Medicaid Expansion Legislation | NCDHHS

[4] N.C. Gen. Stat. §131E-176(7a) defines “Diagnostic center” as a freestanding facility, program, or provider, including but not limited to, physicians’ offices, clinical laboratories, radiology centers, and mobile diagnostic programs.

[5] A diagnostic center will now only be considered for CON review if its collective inventory of medical diagnostic equipment is more than $3 million.

[6] Beginning September 30, 2023, and on annually on September 30 for every year after, cost threshold amount will be adjusted according to Medical Care Index component of Consumer Price Index published by the U.S. Department of Labor for the 12-month period preceding the previous.

Replacement equipment must still be considered “comparable” to equipment it is replacing. See 10A N.C.A.C. 14C .0303 for more details.

[7] As defined by N.C. Gen. Stat. § 131E-136

[8] In compliance with federal Medicaid requirements under 42 U.S.C. § 1396d

[9] Qualified urban ASFs meet the following criteria: 1) licensed by the State to operate as an ASF 2) has a single or multispecialty surgical program 3) located in a county with population greater than 125,000 according to 2020 federal decennial census or any subsequent federal decennial census.

The law is clear the determinant for qualifying under this exemption is the decennial census. Use of county population total in years between will not be considered.

Qualified urban ASF must also meet a charity care requirement pursuant to N.C. Gen. Stat. § 131E-147.5

[10] County population will be according to 2020 federal decennial census or any subsequent federal decennial census. The law is clear the determinant for qualifying under this exemption is the decennial census. Use of county population total in years between will not be considered.

[11] All agencies must remain in compliance with federal Medicaid requirements under 42 U.S.C. § 1396d.

[12] CONFinalReport11.29.23.pdf (ga.gov)

Learn more about RPC’s CON services here