Phillips: Elimination of certificate of need requirement drives down medical costs

August 15, 2013 


— After reading July 10 editorial regarding the certificate of need program, I searched the internet and called numerous health-care providers to find out how Gov. Nikki Haley was “plunging our state’s health-care industry into chaos.”

But there were no news stories of protestors marching in the streets. So I looked deeper and found the opposite perspective. In a letter on the Department of Health and Environmental Control website, Director Catherine Templeton explained that “we do not believe the suspension of the Certificate of Need program presents any threat to the health, safety, and welfare of the public” because DHEC’s construction, licensing and inspection programs were not affected by the veto, and doctors and nurses continue to be licensed and regulated.

As for the certificate of need and its ability to control costs, the editorial says that “market forces alone won’t prevent a glut of heart hospitals, for example, which will drive up costs, because they have to be paid for whether there’s enough business or not.” Well, now I’m scratching my head, because it’s widely documented that when a company builds a hospital and its utilization rate is too low to cover costs, that company loses money — just like when a company opens a grocery store and there’s not enough business.

Without the certificate of need requirement, many health-care professionals are looking to build outpatient care facilities or ambulatory care centers. Most surgeries and other procedures are now being done on an outpatient basis; even hospitals do outpatient procedures. But here’s the difference: Reimbursement for an ambulatory surgery center is 40 percent lower than the same procedure done in a hospital. That’s right, the very same procedure done on an outpatient basis at a hospital costs the insurer and patient 60 percent more than it costs at an ambulatory surgery center. Why? Well, this is only a theory, but the American Hospital Association has a huge lobby working diligently to protect its interests.

Opening an ambulatory surgery center in an area already served by a hospital will add service providers while reducing health-care costs in the area. Providing high-quality services at a significantly lower cost makes insurance premiums drop. Why? The law requires insurance companies to pay 80 percent of their premiums on actual medical care. When the cost of care drops, they have to lower premiums to meet this requirement.

Mary Beth Phillips


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