Sponsor of CON Bill Denies Conflict of Interest

February 18, 2015

Investigative Reports

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MRIFrom 2007 through 2013, a medical supply company in which S.C. Rep. Murrell Smith is an owner received a total of more than $2.3 million in mainly Medicaid and state health insurance plan payments, according to his annual income-disclosure reports.

These days, the Sumter County Republican is the main sponsor of a bill (H. 3250) that would, among other things, strip a provision in state law requiring a “Certificate of Need” (CON) from the S.C. Department of Health and Environmental Control before a medical provider could purchase medical equipment with a total project cost exceeding state limits – currently set at $600,000.

The bill was on Tuesday’s agenda of the House Ways and Means Committee, though Smith, who is chairman of its Healthcare Subcommittee, requested that debate on it be adjourned because of newly proposed amendments.

Contacted last week by The Nerve, Smith, who chaired a special House committee on CON issues, contended his bill wouldn’t affect a medical supply company, known as Reliable Medical Equipment of South Carolina, in which he is listed as a general partner. He said the business sells “durable medical equipment,” such as wheelchairs and walkers, not the far-more expensive medical equipment, such as the full-body Magnetic Resonance Imaging (MRI) machines, that is covered under the current CON law.

“I don’t have any of those, nor do I sell them,” Smith said about MRIs and other high-tech equipment. Asked if the company plans to begin selling that type of equipment, he replied: “There’s no way. Those are the GEs (General Electric Co.). I don’t even know what they cost wholesale.”

The bill, however, as written, would eliminate the medical-equipment language and current total-project-cost cap, and instead require a CON for the “acquisition of new and emerging technology,” defined in the legislation as “equipment, used for diagnosis or treatment, not yet having received approval by the (U.S.) Food and Drug Administration as of the date that the applicant files a letter of intent” pursuant to state law.

“What we’re trying to do (under current state law) is so highly regulated that it stifles competition,” Smith said.

He said certain large national medical providers want the total-project-cost cap to remain in place – or set even lower – so that their competitors would be required to go through the CON process, which can be costly and time-consuming, adding, “You’re using CON to create a monopoly.”

Still, Smith, a member of the House Ethics Committee, stressed his bill would not help Reliable Medical Equipment, noting, “What I’m doing is not under the Certificate of Need.”

State ethics law (Section 8-13-700 of the S.C. Code of Laws) bans a public official from using his office to “obtain an economic interest for himself, a family member, an individual with whom he is associated, or a business with which he is associated.”

Under current state law and regulations, medical equipment is exempt from CON review if it is a “replacement of similar medical equipment that has been issued a CON, and the replacement does not result in a material change in service or a new service,” DHEC spokeswoman Cassandra Harris told The Nerve in a written response last week.

The exemption also applies if a person or health care facility “acquires the medical equipment to be used solely for research,” Harris said.

The CON program, which lawmakers initially approved in 1971 to control the construction of health care facilities and purchase of medical equipment, was thrown into disarray in 2013 when Gov. Nikki Haley vetoed funding for the program, and the House sustained the veto.

“The (CON) Program is an intensely political one through which bureaucratic policy makers deny healthcare providers form offering treatment,” Haley said in her veto message. “We should allow the market to work rather than politics.”

The S.C. Supreme Court last year, however, ruled that eliminating funding for the CON program did not negate the law creating it or “suspend DHEC’s duty to administer” it.

The Nerve’s review of Smith’s annual income-disclosure reports, known as statements of economic interests, filed with the State Ethics Commission, found that from 2007 through 2013, Reliable Medical Equipment received a total of $2,306,881, mainly through the state health insurance plan or Medicaid payments through the state Department of Health and Human Services and various insurers. Total yearly payments ranged from $255,718 in 2007 to $620,414 in 2013; last year’s figures won’t be available until Smith files his next disclosure report, likely in March.

Smith, who was first elected to the House in 2000, also reported that another medical business, known as Abacare Home Medical LLC, in which he listed himself as a general partner, received a total of about $612,000, mainly through the state health insurance plan and Medicaid payments, from 2009 through 2011. Smith told The Nerve that company is no longer operating, through it remains a legal entity.

State ethics law generally requires the disclosure of public, though not private, sources of income.

The Nerve previously has reported about Smith and other lawmakers whose medical businesses have received Medicaid payments. Smith also is an attorney and partner in the Sumter law firm of Lee, Erter, Wilson, Holler & Smith; The Nerve in 2012 reported that 30 attorney-lawmakers or law firms they worked for, including Smith, collectively earned more than $5.3 million in legal fees from state and local government agencies in 2011.

Over the past two months, The Nerve has pointed out the following lawmakers with medical backgrounds who have filed legislation this session relating to their professions: Rep. Kit Spires, R-Lexington and a pharmacist/pharmacy owner; Rep. Deborah Long, R-Lancaster and an optometrist/owner of a vision care business; and Sen. Ray Cleary, R-Georgetown and a dentist.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org. Follow him on Twitter @thenerve_rick. Follow The Nerve on Facebook and Twitter @thenervesc.