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:

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.