No Money Available for DHEC’s Certificate-of-Need Program?

July 10, 2013

Investigative Reports

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StethescopeTwo days after the S.C. House sustained Gov. Nikki Haley’s veto of $1.75 million for the state Department of Health and Environmental Control’s certificate-of-need program, DHEC Director Catherine Templeton announced that the program would be suspended for this fiscal year.

“DHEC has no independent authority to expend state funds for Certificate of Need (CON), and therefore, the veto completely suspends the program for the upcoming fiscal year,” Templeton wrote in a June 28 letter to hospitals and other health care providers. The new fiscal year started July 1.

But in recent years, DHEC has accumulated millions of dollars in reserves – far more than the money needed to run the CON program, which determines, among other things, whether new hospitals or other health care facilities can be built or existing facilities expanded, The Nerve found in a review of state budget documents.

The most recently available Office of State Budget records show that DHEC carried over:

  • $5.4 million in general funds and $41.8 million in “other” funds from fiscal 2012 into fiscal 2013, which started July 1, 2012;
  • $6.7 million in general funds and $39.5 million in “other” funds from fiscal 2011 into fiscal 2012; and
  • $5.8 million in general funds and $44.5 million in “other” funds from fiscal 2010 into fiscal 2011.

Carry-over figures for this fiscal year were not available on Tuesday. As of Monday, DHEC had balances of $88 million in general funds, $123.9 million in “other” funds and $14.1 million in federal funds, according to records provided to The Nerve by the S.C. Comptroller General’s Office.

DHEC’s total ratified budget for this fiscal year is $589.9 million.

Contacted Tuesday by The Nerve, DHEC spokesman Mark Plowden initially declined to discuss whether agency reserves could be used to keep the CON program operating.

“We are not adding anything new to the record while we await word from the Court,” he said in a written response.

Plowden was referring to a petition the agency filed on July 1 with S.C. Supreme Court. The petition, filed against the South Carolina Hospital Association and South Carolina Health Care Association, asks the justices to rule that DHEC can suspend the CON program because the Legislature defunded it, even though lawmakers didn’t repeal the state law authorizing the program.

DHEC also wants the justices to rule on the “effect (of the suspension of the CON program) upon members of the respondent associations (South Carolina Hospital Association and South Carolina Health Care Association) who intend to engage in activity regulated by the Act during Fiscal Year 2013-14.”

In her June 28 letter, Templeton informed hospitals and other health care providers that suspending the CON program has the “practical effect of allowing new and expanding health care facilities to move forward without the Certificate of Need process.”

In a public statement by Templeton that accompanied the filing of the petition to the Supreme Court, Templeton said although the CON program was suspended as of July 1, the agency’s construction and licensing programs for health care facilities were “not affected by the House of Representatives vote to sustain the Governor’s veto.”

“DHEC health officials have concluded the suspension of the Certificate of Need program presents no threat to the health, safety, and welfare of the public,” Templeton said.

Under Supreme Court rules, the hospital and health care associations named in DHEC’s petition have 20 days from the date they were served to issue their written responses about whether the court should accept the case. A court spokeswoman told The Nerve on Tuesday that no responses have been filed yet.

Once the responses are filed, the court will decide whether to hear the case. If the justices grant the request, the associations would have 30 days to file their formal answers to the complaint, under court rules. The justices could decide the case with or without oral arguments, and the court would be under no deadline to issue its ruling.

When pressed further Tuesday about whether DHEC could use any of its reserves to operate the CON program, Plowden referred The Nerve to part of a January 2011 state Supreme Court ruling in which the justices, citing a legal brief filed by then-Senate President Pro Tempore Glenn McConnell, said that “(i)f a line in the appropriations bill is vetoed in a constitutional manner and the veto is sustained, then the line is stricken and there is no longer any authority to expend state funds for the purpose stated on the line.”

In that case, the justices ruled that then-Gov. Mark Sanford violated the S.C. Constitution when he vetoed the general-fund portion – though not all revenue sources – of the state Budget and Control Board’s fiscal 2011 budget. In his veto of the BCB’s $25.2 million general-fund portion of its $248.8 million budget, Sanford wrote that the agency had “over $1 billion in carry-forward funds” available to keep the agency operating throughout the year.

The justices did not specifically address in that case whether the BCB could use its carry-over funds for general operations. The court ruled that Sanford could not, under the state constitution, veto part of an agency’s funding on a budget line, but instead was required to veto all revenue sources on the line.

In her June 25 veto of the CON program funding, Haley rejected the entire proposed $1.75 million for the program, including $1.44 million in general funds and the remainder in federal and “other” funds.

“The Certificate of Need program is an intensely political one through which bureaucratic policymakers deny new healthcare providers from offering treatment,” Haley wrote in her veto message. “We should allow the market to work rather than politics.”

The veto was listed under a heading titled, “Closing Programs That Don’t Work.”

Haley spokesman Rob Godfrey did not respond Tuesday to The Nerve’s written questions about whether DHEC could use any of its reserve funds to keep the CON program operating this fiscal year.

South Carolina is one of 36 states that have some form of a CON program, according to the National Conference of State Legislatures. In 1974, federal law required all states to implement CON-type programs, though the mandate was repealed in 1987.

In the following decade, 14 states repealed their state CON laws, though South Carolina was not among that group, according to the NCSL.

Nerve intern Emily Dawes contributed to this story. Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.