Scoppe: Are hospitals blameless for following advice they knew was legally questionable?

Associate EditorJuly 8, 2014 

— IMAGINE A ROGUE city planning director announces that he will no longer enforce zoning laws or require builders to get permits before they start construction or inspections during construction, whether they’re closing in a garage on the back of a house or developing a Village at Sandhill-sized shopping center.

The city council didn’t repeal the zoning and building laws, a first-year law student could have told the director he didn’t have the authority to do it himself, and critics make his lack of authority very clear to anyone who will listen. Then those critics go to court, the court quickly agrees to hear the case, and it rules — as anyone who wanted to consider the facts and the law and the constitution had been saying for months — that the planning director was acting without authority.

But in the months between the director’s announcement and the court decision, several builders who never did want to be bothered with obeying the law ignored it, and now that the Supreme Court has ruled that the law never was repealed or suspended, those folks are outraged at the idea that they should have to go back and get a permit after violating a law that a rogue agency director told them they could violate.

What should happen to them?

The S.C. Chamber of Commerce, along with a number of businesses that took advantage of the illegal suspension, thinks they should be allowed to continue violating the law. Finish those projects they started without authorization, rather than having to go back and get permission. Much less face punishment.

At issue in the real-life case is South Carolina’s certificate of need law, which requires hospitals, doctors and other medical providers to get state approval to make major purchases or undertake major expansions. You can argue all day long about whether that’s a reasonable thing for the state to require — and I believe it is, in order to reduce expensive duplication that we all end up paying for, through our taxes and our private insurance, and in order to allow medical professionals to do the volume of highly technical work necessary to maintain their expertise. But the wisdom of the law was never at issue in this case.

At issue: Rule of law

The issue was whether DHEC Director Catherine Templeton had the legal right to suspend the certificate of need requirement after Gov. Nikki Haley vetoed its funding last summer. And as all five members of our Supreme Court agreed this spring — in a ruling that surprised absolutely no one who has even passing familiarity with the facts or the law or the constitution — she did not have that authority. All of the justices agreed that vetoing the funding to review applications did not eliminate the law that requires medical facilities to get certificates. It merely eliminated that funding.

Four of the justices said that DHEC had the authority, and therefore was required, to find another way to fund the program — either by shifting money around in its budget, as state law allows, or by increasing application fees, as state law also allows it to do. Associate Justice Costa Pleicones wrote that the court could not order DHEC to fund the program, but contrary to what Gov. Nikki Haley implied in response to the ruling, he most certainly did not say that Ms. Templeton had the authority to pretend that the Legislature had repealed the certificate requirement.

Clearly, Ms. Templeton bears primary responsibility for this mess. (I suspect the governor egged her on, although she told me last summer she had acted on her own.) But she is not alone. The hospitals and other businesses that launched construction programs and made expensive purchases without the required approval are not naive bystanders, free from responsibility.

Yes, we should be able to assume that what the director of a state agency tells us we can do is something we can do. But there was no secret about the fact that Ms. Templeton’s action was, to put it extremely kindly, legally questionable. And these are not unsophisticated businesses that could argue that they weren’t aware of the controversy. Indeed, a lot of hospitals and other businesses made the decision to halt their expansion plans until the matter was resolved, either in court or in the Legislature.

One lawsuit estimates that as many as 70 businesses instead went forward with purchases and construction without permission; among them was Lexington Medical Center, whose action now is being challenged by Providence Hospitals. Lexington, of course, never has tried to hide its opposition to the certificate of need requirement; recall that after DHEC turned down its request to build an open-heart surgery unit in 2004, its foundation hired then-Rep. Haley for a well-paid job for which she had no apparent qualifications, in what her critics charged was nothing more than an effort to get the law changed.

Forgiveness strategy

I suspect that Lexington and most if not all of the other businesses moved forward on the “better to ask for forgiveness than permission” notion — gambling that the uber-business-friendly Legislature would say: “Oh, that’s OK; you acted in good faith; you couldn’t possibly have have known that the director was acting without authority.”

And indeed, there was a strong push to do precisely that; the Senate included a proviso in the budget that would have barred DHEC from taking “any enforcement action against a person or health care facility that undertook a project or purchase of equipment from June 28, 2013 until April 15, 2014,” without the required authorization.

But someone in the House didn’t like that idea, and removed it from the budget when Senate Finance Chairman Hugh Leatherman and House Ways and Means Chairman Brian White secretly negotiated their compromise bill. Rep. Jim Merrill tried to put the language back into the budget when the House took up the secret Leatherman-White plan on June 4, but he failed on a 66-49 vote.

So now, according to the Chamber, House members are the bad guys. For insisting that people obey the law.

The Chamber did allow, in a newsletter last month, that “The confusion on the existence of a CON permitting program was created by bad public policy.” But it concluded that “the House has again walked away from resolution that is vital to businesses that invested dollars and created jobs,” and it argued that it was “unfair” that “health care facilities across this state are at risk of being forced to start the arduous permitting process all over, costing significant time and dollars.”

Perhaps it would be unfair, if there were any businesses that didn’t know full-well what they were doing. But what about fairness to the rest of us, who ultimately will pay for any new facilities that wouldn’t have been authorized?

If you allow those businesses to continue to disobey the law, wouldn’t that be sort of like allowing that strip club to open up in the middle of a residential neighborhood, right next to an elementary school, because it managed to start construction before the court was able to overturn that rogue planning director’s “suspension” of the city’s zoning laws?

Ms. Scoppe can be reached at cscoppe@thestate.com or at (803) 771-8571. Follow her on Twitter @CindiScoppe.

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