South Carolina Finalizes New ASC Licensing Regulations

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South Carolina Finalizes New ASC Licensing Regulations

Latest requirements a result of CON reform in 2023

BY STEPHEN ABRESCH | JULY 26, 2024

Surgery centers in South Carolina now face new obligations due to implementation of the certificate of need (CON) reform that occurred on May 16, 2023. Based on that CON reform, the South Carolina Department of Health and Environmental Control (SCDHEC) finalized significant changes to the state’s ASC licensing regulations on June 28. The final regulations include new indigent/charity care and annual reporting requirements for ASCs established after the CON reform took effect, a new written transfer agreement requirement for all ASCs, and changes to existing cardiac services requirements alongside more minor licensing changes.

Background

South Carolina Governor Henry McMaster signed SB 164 into law on May 16, 2023, eliminating CON requirements for almost all health facilities, including ASCs, in the state, but excluding nursing homes and the Medical University of South Carolina. Passage of SB 164 marked the culmination of four years of concerted effort by an array of organizations and state legislators to secure major reforms to the state’s CON program and was the most significant change to the program in its more than 50-year lifespan.

In exchange for the exemption from CON requirements, the law added new licensing requirements for ASCs and required further rulemaking to establish additional requirements. To be licensed by the state, any ASC established or constructed after May 16, 2023, would have to provide indigent/charity care to patients in an amount equal to 2 percent of their adjusted gross revenue if they provide care to Medicaid beneficiaries or 3 percent of their adjusted gross revenue if they do not treat Medicaid beneficiaries. These ASCs would also be subject to new annual reports to SCDHEC to demonstrate compliance with the indigent/charity care requirements. SCDHEC was required to promulgate regulations within one year of the law taking effect setting forth how ASCs would comply with the new indigent/charity care requirements.

Proposed Rule

The proposed rule was first published in the state register on November 24, 2023. Alongside the expected implementation of the indigent/charity care requirements and minor updates, like changes to inspection fees, were certain unexpected provisions. Under the proposed rule, all ASCs would be newly required to have a written transfer agreement with one or more hospitals providing reasonable assurances that transfer of patients would be made between the two facilities in case of an emergency at the ASC, a potential new point of leverage for hospitals over ASCs even as CON requirements were removed. Both ASCA and the South Carolina Ambulatory Surgery Center Association flagged this as an area to seek amendments from SCDHEC.

Final Rule

With publication in the register on June 28, the new ASC licensing requirements became final. New language surrounding cardiac services at ASCs was incorporated into the rule during the rulemaking process. Prior to establishing or offering invasive cardiac procedures, including cardiac catheterization services, a facility must now be in the process of obtaining accreditation for such services from the American College of Cardiology, Accreditation for Cardiovascular Excellence or another nationally recognized accrediting organization.

The transfer agreement requirement was retained, but an important exemption was included in the final rule. ASCs must still secure a written transfer agreement with one or more hospitals to ensure patient transfer in an emergency but can also show compliance by maintaining documentation of efforts to secure the agreement if they are unable.

The indigent/charity care requirements imposed on ASCs established or constructed after May 16, 2023, match those stated in SB 164. The annual reports facilities are required to submit to comply with these requirements create an additional layer of burden for newly constructed facilities. After being in operation for two calendar years, these ASCs must submit annual reports to SCDHEC that feature a range of information, including

  • gross patient revenue (“includes charges generated by all patients at full established rates before provisions for contractual and other adjustments are applied, and any revenue forgone for provision of care for indigent/charity patients at full established rates”);
  • Medicare contractual adjustments (“any charges not paid by third-party payers [Medicare] and that cannot be billed to the patient pursuant to contractual agreements”);
  • Medicaid contractual adjustments (“any charges not paid by third-party payers [Medicaid] and that cannot be billed to the patient pursuant to contractual agreements”);
  • other revenue (“other revenues or gains derived from services other than providing services to patients. This may include revenues shared with the facility from another organizational entity”); and
  • total expenses (“the sum of resources consumed in fulfillment of a facility’s ongoing major or central operations. Expenses may result from current expenditures, incurring obligations to make future expenditures, or consuming resources obtained from previous expenditures. Expenses related to activities shared with entities other than the ambulatory surgical facility should be allocated between the entities. The expense component not allocated to the ambulatory surgical facility should not be included in the report. Appropriate matching of revenues and expenses excluded from the report should be made. Do not include bad debt as a total expense, but as a deduction from revenue”).

The indigent/charity care requirements, with the sizeable annual reporting accompaniment, may not be as large an obstacle as the old CON requirements but could still give developers pause as they consider new ASCs in a post-CON South Carolina.

Write Stephen Abresch with any questions.