H 4244 Session 109 (1991-1992)
H 4244 General Bill, By W.S. Houck, M.O. Alexander, J.J. Bailey, R.A. Barber,
J.M. Baxley, D.W. Beatty, Carnell, L.L. Elliott, S.R. Foster, Glover,
J.L. Harris, B.H. Harwell, J.H. Hodges, Jennings, K.G. Kempe, H.H. Keyserling,
M.H. Kinon, S.G. Manly, J.G. Mattos, J.T. McElveen, McKay, M. McLeod, Neilson,
E.L. Nettles, T.F. Rogers, I.K. Rudnick, Scott, Sheheen, J.J. Snow, C.Y. Waites and
L.S. Whipper
A Bill to amend the Code of Laws of South Carolina, 1976, by adding Chapter 8
to Title 44 so as to enact the State Health Services Cost Review Commission
Act.
01/22/92 House Introduced and read first time HJ-8
01/22/92 House Referred to Committee on Medical, Military,
Public and Municipal Affairs HJ-8
03/17/92 House Tabled in committee
A BILL
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976,
BY ADDING CHAPTER 8 TO TITLE 44 SO AS TO ENACT THE
STATE HEALTH SERVICES COST REVIEW COMMISSION ACT.
Whereas, health care costs are increasing at alarming rates in South
Carolina as well as nationwide; and
Whereas, these high costs make it difficult for many citizens to receive
and pay for health care; and
Whereas, when health care services are not paid for by the recipient of
the services, or not fully reimbursed, costs are shifted to paying patients;
and
Whereas, when costs are shifted to paying patients charges increase
often exceeding the actual cost of the service; and
Whereas, receiving health care of the highest quality, efficiently
provided, and properly utilized and at a reasonable cost is of vital
interest to the State and its citizens, and is a desirable goal for the State;
and
Whereas, achieving this goal is not possible unless, strong measures are
taken to obtain control and regulation of the cost of health care; and
Whereas, methods to achieve this goal may include: global budgeting for
uniformity of rates; equitable, uniform rates for all payors and
purchasers of health services; regulation of health care manpower
utilization and distribution; efficient utilization of health services and
medical procedures, equipment, and technology; and health care services
cost and fee containment; and
Whereas, a logical and practical beginning to this process is to establish
a cost review commission to initiate this process to place uniformity and
cost containment measures into the State's health care services system.
Now, therefore,
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. The 1976 Code is amended by adding:
"CHAPTER 8
State Health Services Cost Review Commission
Section 44-8-10. It is declared to be the public policy of the State
that health services delivered in this State must be of the highest quality
and of demonstrated need, efficiently provided, and properly utilized, at
a reasonable cost. In order to provide for the protection and promotion
of the health of the citizens of this State, to promote the financial
solvency of health care facilities, and to contain the rising cost of health
services, the State Health Services Cost Review Commission,
established pursuant to this chapter, has the central, comprehensive
responsibility for the development and administration of this policy with
respect to health services cost containment.
Section 44-8-20. As used in this chapter:
(1) `Commission' means the State Health Services Cost Review
Commission.
(2) `Facility' means, whether operated for a profit or not:
(a) a `hospital' as defined in Section 44-7-130; and
(b) a `health care facility' as defined in Section 44-7-130.
(3) `Health care provider' means an individual, a person,
organization, or corporation licensed, certified, or otherwise authorized
or permitted by the laws of this State to administer health services.
(4) `Health services' means clinically related, diagnostic,
treatment, or rehabilitative services, and includes alcohol, drug abuse,
and mental health services for which specific standards or criteria are
prescribed in the State Medical Facilities Plan and which are performed
in or provided by a facility, including health services provided in a
facility by a physician or by a health care provider.
(5) `Physician' means an individual who is licensed to practice
medicine or osteopathy under Chapter 47 of Title 40.
Section 44-8-30. (A) There is established the State Health
Services Cost Review Commission which consists of:
(1) one member from each congressional district to be
appointed by the legislative delegation of each district;
(2) a representative of the South Carolina Hospital Association
appointed by the Governor upon the recommendation of the association;
(3) a representative of the South Carolina Medical Association
appointed by the Governor upon the recommendation of the association;
(4) one member at large appointed by the Governor;
(5) the Commissioner of the Department of Insurance shall
serve as an ex officio nonvoting member of the commission;
(6) the Administrator of the Department of Consumer Affairs
shall serve as an ex officio nonvoting member of the commission.
(B) The members from the congressional districts and the at-large
member must represent consumers of health services and may not be a
provider of health services nor associated with a health care provider or
with the management or policy of a health care facility.
(C) The terms of members are for six years and until their
successors are appointed and qualify. No member may serve more than
one term.
(D) The hospital association membership on the commission must
alternate between a representative of a large, urban hospital and a
smaller, rural, hospital.
(E) Annually, the members shall elect a chairman and a vice
chairman.
Section 44-8-40. The commission shall meet at least six times a
year, upon the call of the chair. A majority of the membership of the
commission constitutes a quorum. The members of the commission are
allowed the usual per diem, mileage, and subsistence as provided by law
for members of state boards, committees, and commissions.
Section 44-8-50. (A) The commission must employ an
executive director as the chief administrative officer of the commission
who serves at the pleasure of the commission.
(B) Under the direction of the commission, the executive director
shall perform any duty or function that the commission requires to carry
out purposes and the policy of the State as set out in this chapter. The
commission may employ a staff in accordance with the state budget.
Section 44-8-60. (A) To carry out its responsibilities and the
purposes of this chapter, the commission shall promulgate regulations
pursuant to the Administrative Procedures Act.
(B) The commission shall participate or conduct studies and
submit recommendations to the General Assembly that relate to:
(1) health care costs;
(2) utilization of facilities, health services, medical
procedures, equipment, and technology by health providers and
consumers;
(3) access to health services;
(4) health care manpower utilization and distribution;
(5) health insurance costs and rates of reimbursement;
(6) other matters relating to health care costs and cost
containment including, but not limited to, facility administrative and
marketing costs.
(C) By October first of each year, the commission shall submit to
the Governor and the General Assembly an annual report on the
operations and activities of the commission during the preceding fiscal
year and make policy or legislative recommendations that the
commission considers beneficial in furthering the purposes of this
chapter and the policy of this State.
(D) Commensurate with its duties and responsibilities under this
chapter, the commission may:
(1) appoint advisory committees that may include individuals
and representatives of interested public or private organizations;
(2) enter an agreement with a payor of health services;
(3) contract with a qualified, independent third party for any
service necessary;
(4) require facilities, physicians, and health care providers to
submit relevant health services cost information;
(5) publish and disseminate information that relates to the
financial aspects of health care.
Section 44-8-70. (A) The commission shall review and approve
health services rates and charges for facilities and for services provided
by physicians and health care providers in a facility to assure each
purchaser of health services that:
(1) the cost of all health services performed in or provided by
a facility are reasonable;
(2) the aggregate rates of the facility are related reasonably to
the aggregate costs of the facility; and
(3) the rates are set equitably among all purchasers or classes
of purchasers without undue discrimination or preference.
(B) In approving facility rates and charges or requests for change
in rates or charges, the commission may not require a reduction in rates
or charges below the lowest usual, customary, and reasonable charge
existing in the last twenty-four months, and the commission may not
approve an increase that exceeds the inflation rate of the last twelve
months as established by the consumer price index.
(C) In approving health care provider rates and charges or requests
for change in rates or charges, the commission may not require a
reduction in rates or charges below the lowest usual, customary, and
reasonable charge for the specific service or procedure existing in the
last twenty-four months and the commission may not approve an
increase that exceeds the inflation rate of the last twelve months as
established by the consumer price index.
(D) In reviewing and approving rates and charges or in
considering a request for change in rate or charges, the commission may
take into account objective standards of efficiency and effectiveness.
(E) In reviewing and approving rates and charges or considering
a request for change in rates or charges, the commission shall permit
rates to be charged that, in the aggregate, will produce enough total
revenue to enable the reporting requirements of this chapter to be
reasonably met.
(F) The commission shall:
(1) permit a nonprofit facility to charge rates that will permit
the facility to provide, on a solvent basis, effective and efficient service
that is in the public interest; and
(2) permit a proprietary profit-making facility to charge rates
that:
(a) will permit the facility to provide effective and efficient
service that is in the public interest; and
(b) based on the fair value of the property and investments
that are related directly to the facility, include enough allowance for and
provide a fair return to the owner of the facility; and
(3) permit a physician or health care provider to charge rates
for health services that will permit the physician or health care provider
to provide effective and efficient services that are in the public interest
and that allow for and provide a fair return to the physician or health
care provider.
(G) Approval of rates that permit a facility in subsection (F)(1) to
provide services on a solvent basis applies only to nonprofit facilities
that demonstrate the ability to operate on a solvent basis at reasonable
rates.
(H) To promote the most efficient and effective use of health
services and, if it is in the public interest and consistent with this
chapter, the commission may promote and approve alternate methods of
rate determination and payment that are of an experimental nature.
(I) A facility, physician, or health care provider charging rates for
health services that have not been approved by the commission are
subject to suspension or revocation of the license or authorization that
allows the facility to operate or that allows a physician or health care
provider to administer health services in this State.
(J) Except as otherwise provided by law, in reviewing and approving
rates and charges or considering a request for changes in rates and
charges, the commission may not hold executive sessions.
Section 44-8-80. (A) In order to review health services rates
and charges, the commission shall obtain and consider:
(1) hospital data as reported to the Division of Research and
Statistical Services of the State Budget and Control Board pursuant to
Section 44-6-170;
(2) usual, customary, and reasonable charges for South
Carolina physicians as compiled annually by the Health Insurance
Association of America;
(3) other relevant information which may include, but is not
limited to, administrative and marketing costs.
(B) Health care facilities and health care providers for whom rate
and charge information is not available under subsection (A) shall
submit relevant financial and accounting information in accordance with
regulations promulgated by the commission which the commission shall
review and consider in approving these rates and charges.
Section 44-8-90. In collecting data to carry out its duties and
responsibilities under this chapter and in compiling information for rate
review, the commission shall use existing data that is available and
accessible and shall minimize duplication of reporting requirements,
whenever possible.
Section 44-8-100. Any acquisition or construction by a facility of
a building that is not used in the delivery of health services must be
approved by the commission.
Section 44-8-110. The commission shall require each facility to
disclose publicly its financial position and the verified total costs
incurred by the facility in providing health services based upon
computations established in regulations promulgated by the commission.
Section 44-8-120. (A) The facility shall provide to the
commission physician and health care provider information sufficient to
identify practice patterns of individual physicians and health care
providers across all facilities. The names of individual physicians and
health care providers are confidential and are not discoverable or
admissible in evidence in a civil or criminal proceeding, and may only
be disclosed to the following:
(1) the utilization review committee of a South Carolina
hospital;
(2) the State Board of Medical Examiners or the licensing
board of a relevant health care provider.
Section 44-8-130. (A) A facility, physician, or health care
provider shall charge for health services only at a rate set in accordance
with this chapter.
(B) The commission shall define by regulation the types and
classes of charges that may not be changed except as specified in this
chapter.
(C) No change may be made in any rate schedule or charge of any
type or class defined by regulation under subsection (B) unless a written
notice of the proposed change with documentation supporting the
proposed change is filed with the commission. Unless the commission
orders otherwise in conformity to this section, a change in the rate
schedule or charge is effective on the date that the notice specifies,
which must be at least thirty days after the date on which the notice is
filed.
(D) Commission review of a proposed change may not exceed one
hundred fifty days after the notice is filed. The commission may hold
a public hearing to consider the change. If the commission decides to
hold a public hearing, within sixty-five days after the filing of the notice,
the commission shall set a place and date for the hearing; and may
suspend the effective date of a proposed change until thirty days after
conclusion of the hearing. If the commission suspends the effective date
of a proposed change, the commission shall give the facility a written
statement of the reasons for the suspension. The commission may
conduct the public hearing without complying with formal rules of
evidence and shall allow an interested party to introduce evidence that
relates to the proposed change, including testimony by witnesses.
(E) The commission may permit a temporary change in a rate or
charge, if the commission considers it to be in the public interest. An
approved temporary change becomes effective immediately on filing.
Under the review procedures of this section, the commission promptly
shall consider the temporary change.
(F) If the commission modifies a proposed change or approves
only part of a proposed change, a facility, physician, or health care
provider, without losing the right to appeal the part of the commission
order that denies full approval of the proposed change, may charge
patients according to the decision of the commission and accept any
benefits under that decision.
(G) If a change in a rate or charge increase becomes effective
because a final determination is delayed due to an appeal or otherwise,
the commission may order the facility, physician, or health care
provider:
(1) to keep a detailed and accurate account of:
(a) funds received because of the change; and
(b) the persons from whom these funds were collected; and
(2) as to any funds received because of a change that later is
not approved:
(a) to refund funds with interest; or
(b) if a refund of the funds is impracticable, to charge over
and amortize the funds through a temporary decrease in charges or rates.
(H) A decision by the commission on any contested change under
this section must comply with the Administrative Procedures Act and
may be only prospective in effect.
Section 44-8-140. (A) If the commission considers an
investigation necessary or desirable to authenticate information in a
report filed under this chapter, the commission may examine, in
accordance with the regulations of the commission, the records or
accounts of the facility, physician, or health care provider which
submitted the report.
(B) The examination under this section may include a full or
partial audit of the records or accounts that is:
(1) provided by the facility; or
(2) performed by:
(a) the staff of the commission; or
(b) a third party for the commission.
Section 44-8-150. (A) In any matter that relates to the cost of
health services the commission may:
(1) hold a public hearing;
(2) conduct an investigation;
(3) require the filing of information; or
(4) subpoena witnesses or evidence.
(B) The executive director of the commission may administer
oaths in connection with a hearing or investigation under this section.
(C) Annually the commission shall conduct a public hearing to
receive testimony and information from interested citizens on health care
costs and related issues.
Section 44-8-160. (A) Except as provided in subsection (C), a
facility shall notify the commission at least thirty days before executing
a financial transaction, contract, or other agreement that would:
(1) pledge more than fifty percent of the operating assets of
the facility as collateral for a loan or other obligation; or
(2) result in more than fifty percent of the operating assets of
the facility being sold, leased, or transferred to another person or entity.
(B) Except as provided in subsection (C), the commission shall
publish a notice of the proposed financial transaction, contract, or other
agreement reported by a facility in accordance with subsection (A) in a
newspaper of general circulation in the area where the facility is located.
(C) This section does not apply to a financial transaction, contract,
or other agreement made by a facility with an issuer of tax exempt
bonds, including the State or any county or municipality of the State, if
a notice of the proposed issuance of revenue bonds has been published
and the notice meets the requirements of Section 147(f) of the Internal
Revenue Code.
Section 44-8-170. The commission shall provide incentives for
merger, consolidation, and conversion of facilities. On notification of
a merger or consolidation by two or more facilities, the commission shall
review the rates of those facilities that are directly involved in the
merger or consolidation in accordance with the rate review and approval
procedures provided in this chapter and the regulations of the
commission. The commission may provide, as appropriate, for
temporary adjustment of the rates of those facilities that are directly
involved in the merger, consolidation, or conversion in order to provide
sufficient funds for an orderly transition. These funds may include, but
are not limited to:
(1) allowances for those employees who are or would be
displaced;
(2) allowances to permit a surviving institution in a merger to
generate capital to convert a closed facility to an alternate use; or
(3) agreements to allow retention of a portion of the savings
that result for a designated period of time.
Section 44-8-180. (A) This section applies to each person who
is concurrently:
(1) a trustee, director, or officer of any nonprofit facility in this
State; and
(2) an employee, partner, director, officer, or beneficial owner
of three percent or more of the capital account or stock of:
(a) a partnership;
(b) a firm;
(c) a corporation; or
(d) any other business entity.
(B) Each person specified in subsection (A) shall file with the
commission an annual report that discloses, in detail, each business
transaction between a business entity specified in subsection (A)(2) and
a facility that the person serves as specified in subsection (A)(1), if any
of the following is ten thousand dollars or more a year:
(1) the actual or imputed value or worth to the business entity
of a transaction between it and the facility;
(2) the amount of the contract price, consideration, or other
advances by the facility as part of the transaction.
(C) A report under this section must be signed, verified, and filed
in accordance with the procedures and on the form that the commission
requires.
(D) A person who wilfully fails to file a report required by this
section is guilty of a misdemeanor and, upon conviction, may be fined
not more than five hundred dollars.
Section 44-8-190. (A) The commission must be funded through
user fees established by regulations promulgated by the commission and
assessed against facilities, physicians, and health care providers in a fair
and equitable manner.
(B) The commission shall establish minimum and maximum
assessments and assess each facility, physician, and health care provider
on or before June thirtieth of each year.
(C) On or before September first of each year, each facility,
physician, and health care provider assessed under this section shall
make payment to the commission. The commission shall make
provision for partial payments. A bill not paid within thirty days of an
agreed payment date may be subject to an interest penalty to be
determined by the commission.
Section 44-8-200. (A) Except for privileged medical
information, the commission shall make:
(1) each report filed and each summary, compilation, and
report required under this chapter available for public inspection at the
office of the commission during regular business hours; and
(2) each summary, compilation, and report available to any
agency on request.
(B) Unless permission is granted specifically by the commission,
a person who is an employee or agent of the commission or under
contract with the commission may not release, publish, or otherwise use
any information to which this person has access.
Section 44-8-210. A person aggrieved by a final decision of the
commission under this chapter may appeal to the circuit court. The
appeal must be made as provided for judicial review of final decisions
in the Administrative Procedures Act. An appeal from a final decision
of the commission under this section must be taken in the name of the
person aggrieved as appellant and against the commission as appellee.
The commission is a necessary party to an appeal at all levels of the
appeal. The commission may appeal a decision that affects any of its
final decisions to a higher level for further review. On grant of leave by
the appropriate court, any aggrieved party or interested person may
intervene or participate in an appeal at any level. A person, government
agency, or nonprofit health service plan that contracts with or pays a
facility for health services has standing to participate in commission
hearings and may appeal final decisions of the commission.
Section 44-8-220. In determining and setting the rate of payment
or reimbursement for claims under health or accident insurance, or both,
an insurance company selling these policies in South Carolina and the
South Carolina Insurance Commission must take into account the rates
and charges approved for health services pursuant to this chapter.
Before selling a policy for health or accident insurance, or both, an
insurance company must disclose to the purchaser what percentage of
the approved rates and charges the company will pay or reimburse for
health services claims."
SECTION 2. Of those members of the commission first appointed to
serve, three shall serve two-year terms, three shall serve four-year terms
and three shall serve six-year terms. Only the members appointed to
serve two-year terms may be reappointed.
SECTION 3. In approving the initial rates and charges under this act,
the commission may not require a reduction in rates or charges below
the lowest usual, customary, and reasonable charge existing within
twenty-four months before this act's effective date for facilities or for the
specific service or procedure for health care providers.
SECTION 4. In order to ensure the effectiveness of this chapter and
to promote the goals and purposes set out in this act, it is necessary to
establish a system in which rates are set equitably and uniformly among
all payors and purchasers of health services. To accomplish this, the
following must be completed at the earliest date possible and no later
than July 1, 1993:
(1) The State Health Services Cost Review Commission shall
comply with the requirements of Section 1886(C) of the Social Security
Act in order to obtain a Medicare waiver.
(2) The Health and Human Services Finance Commission must
submit an amendment to the State Medicaid Plan to the United States
Department of Health and Human Services to obtain a Medicaid waiver.
SECTION 5. The operating budget of the State Health Services Cost
Review Commission funded through user fees assessed pursuant to this
act may not exceed one million dollars for fiscal year 1992-93, and if the
start up of the commission is delayed, the budget and fees must be
prorated accordingly. Annual commission budget increases and user
fees charged by the commission may not exceed the inflation rate of the
last twelve months as established by the Consumer Price Index.
SECTION 6. The commission shall review and approve all health
services rates and charges for facilities, physicians, and health care
providers pursuant to this act which must become effective
simultaneously no later than January 1, 1994.
SECTION 7. After December 31, 1997, or four years after rates have
become effective, whichever occurs first, the Health Care Planning and
Oversight Committee must review and evaluate the operation of the
commission and the effect of the rate setting procedures contained in this
chapter on health care costs and on the implementation of the policy of
the State as set forth in this act. The Health Care Planning and
Oversight Committee must report its findings to the Governor and the
General Assembly by December 31, 1998.
SECTION 8. This act takes effect July 1, 1992.
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