SC health system loses right to build new hospital to Tenet competitor

South Carolina’s fractured certificate of need (CON) process for new hospital construction has led to a protracted fight over who would be allowed to build a new hospital in Fort Mill, S.C. On Tuesday, a judge took the CON last awarded to Carolinas HealthCare System in 2011 and handed it to competitor Piedmont Medical Center, a hospital operated by a Tenet Healthcare subsidiary.

Piedmont Medical Center serves the nearby community of Rock Hill, S.C., and the surrounding York County area. It had argued that allowing competitor Carolinas HealthCare System to build the hospital in Fort Mill, a community with relatively high rates of privately insured patients, would cause it financial harm by drawing these patients away. It also pointed to the services it currently provides in the area, including ambulance service and a 24-hour urgent care clinic, as well as covering York County’s indigent care tax.

“This court is impressed with the commitment Piedmont has made to its community through the York County contract,” wrote South Carolina Administrative Law Judge S. Phillip Lenski in his decision. “The citizens of York County derive innumerable benefits as a result of the transparency and enforceable obligations of the contract. While Piedmont could have withdrawn from the contract at points during the past three decades, Piedmont has continued to maintain its commitment to reasonable pricing, capital reinvestment, ambulance services that operate at a substantial loss to Piedmont, and comprehensive annual reports on the operation of the hospital and its performance under the contract.”

Lenski also noted that he thought Piedmont’s plans for a 100-bed facility (nearly twice as large as what Carolinas HealthCare System had planed) better fit the needs of the Fort Mill community. Ten of those beds will be intensive care unit (ICU) beds, and Piedmont also plans to have an emergency room on site.

“We celebrate today with the community of Fort Mill as they are one step closer to getting the high-quality hospital that they have deserved for years,” said Bill Masterton, chief executive officer of Piedmont Medical Center in a statement released the same day as Judge Lenski handed in his decision. Masterton will serve as CEO of both Piedmont Medical Center and the new Fort Mill Medical Center facility.

CON rules for new healthcare facilities are confusing in many states and this is certainly the case in South Carolina. The arguments about who should build the hospital in Fort Mill have gone on for nearly a decade with Carolinas HealthCare System most recently winning the CON in a 2011 decision that Judge Lenski overturned.

There is even a state Supreme Court case over whether the CON program should be operating at all at this time. Last year, Governor Nikki Haley and the state House of Representatives vetoed funding for the CON program because of their belief that the CON program interfered with free market decision making in where health care services and facilities should be located.

The CON program subsequently shut down. However, the court will hear arguments that the withdrawal of funding did not absolve the state of the responsibility to operate the CON program. Overturning a government program must be done by an act of legislation, not just by defunding, say those who seek to restore the CON program.

Given the uncertainty about whether the CON program is even applicable right now, one option for Carolinas HealthCare System, if it wishes to continue the fight, is to simply file another CON application and see what happens, noted Lynn Bailey, a Columbia-based health care economist, in an article in local online news source HeraldOnline.com.