Gov. Tate Reeves vetoed the legislature’s certificate of need reform bill Thursday, arguing it unlawfully attempted to circumvent an ongoing court case by granting a certificate to a single psychiatric hospital in Jackson. 

The state’s law, which requires medical facilities to apply for a “certificate of need” from the Mississippi State Department of Health before opening or adding new services, aims to lower costs and increase the accessibility and quality of health care by avoiding duplication of services. 

A Senate amendment to the bill would have granted a new certificate of need to Oceans Behavioral Hospital Jackson and put to bed a legal dispute with Merit Health Central over the amount of charity care the hospital must provide. 

For-profit, Texas-based Oceans reopened St. Dominic’s Health’s shuttered mental health unit last year. 

Merit Health, which also operates a psychiatric unit in Jackson, sued Oceans last March, arguing it violated the law by using a workaround to skirt a health department requirement that it provide more free or low-cost care than it planned to in its application for a certificate of need. In the lawsuit, attorneys for Merit argued that Oceans not providing a sufficient level of charity care would have a “significant adverse effect” on Merit by diverting more low-income patients to its beds. 

“The proposed amendment smacks of both imprudent legislative favoritism towards the entity that will receive the CON, as well as bald prejudice to the other market participants,” Gov. Reeves wrote in his veto message. “In either case, awarding a CON by legislative fiat is bad public policy.”

Most of the bill was focused on making it easier for medical facilities to make capital improvements and require the University of Mississippi Medical Center seek state approval before opening educational facilities outside of Jackson. The final version of the bill also mandated that the health department study uncompensated care rates in psychiatric hospitals, such as the beds at the center of the Oceans lawsuit.

The governor said he would sign the bill if the carve-out for Oceans was removed.

In a statement to Mississippi Today, Oceans CEO Stuart Archer said his company remains committed to providing behavioral health care in the state.

“Oceans is fulfilling that commitment to the residents of Jackson and communities across Mississippi, and we will continue to fight for our hospital’s ability to provide care,” he said.

Rep. Sam Creekmore, R-New Albany and chair of the Public Health and Human Services committee and author of the House’s proposal, told Mississippi Today he was disappointed but not surprised by the governor’s veto. While he did not disapprove of the provision granting a certificate of need to Oceans, he suspected it might draw scrutiny from the governor. 

He said he has asked the governor to include certificate of need reform as a topic in his call for a special session to pass a bill this year.

“I think it’s very important for our rural hospitals especially to get this done now,” he said. 

The legal battle over care at the psychiatric unit housed at St. Dominic’s Health has now been ongoing for over a year. 

The state health department, which is tasked with overseeing the certificate of need process, recommended approval of Oceans’ application in December 2023, but said the hospital would have to provide 17% free or low-cost medical care to low-income individuals – more than the two percent it proposed in its application. 

But rather than adhere to the state’s stipulation for charity care, Oceans and St. Dominic’s filed for a change of ownership, bypassing the state’s requirement altogether and instead qualifying to open under St. Dominic’s existing certificate of need. 

Merit Health then sued Oceans, arguing that the change of ownership violated the state’s certificate of need law. St. Dominic’s and the State Department of Health are codefendants in the case. 

Earlier this month, a Hinds Chancery court judge ruled that Oceans’ change of ownership was legal, but that the health department exceeded its authority by not undergoing certificate of need review and ruled that the agency must complete the review within 120 days.

The health department appealed the case to the Supreme Court in March, requesting a stay. The court has yet to rule on the appeal. 

Sen. Hob Bryan, D-Amory, chairman of Public Health and Welfare, introduced the Oceans-related amendment and said it, along with the requirement that UMMC seek state approval before opening educational facilities outside of Jackson, sought to develop and improve upon medical services in the capital city.

On the Senate Floor, he also said it aimed to put an end to the legal battle. 

“There’s a lawsuit pending trying to say that the transfer was improper,” he said March 12. “The transfer was proper. What we hope to do with this is moot the lawsuit.”

A spokesperson for Merit Health said charity care provisions should be equitable to ensure hospitals can treat people with the greatest health needs. 

“We will continue to support changes to CON regulations that improve access to healthcare and reduce barriers to healthcare delivery for all providers,” she said.  

St. Dominic’s and the state health department declined to comment on the ongoing litigation. 

Certificate of need legislation shapeshifted over the course of the session. During the process, the Senate removed several key provisions of the bill originally approved by the House of Representatives, including those that would have streamlined the law’s appeals process and freed certain in-demand health care services – including substance use treatment and outpatient hospital dialysis units – from being required to acquire a “certificate of need” from the state to open. 

Mental health reporter Allen Siegler contributed to this story.