Certificate of Need Laws By State — What They Mean For You

In roughly 35 states, a hospital cannot build a new wing, a clinic cannot purchase an MRI machine, and a surgery centre cannot open its doors without first obtaining government approval. These are Certificate of Need laws — CON laws — and most Americans have never heard of them despite the fact that they directly affect where you can receive care, how long you wait for it, and how much you pay. This guide explains what CON laws are, which states have them, and what the evidence says about whether they help or hurt patients.

What Is a Certificate of Need Law?

Certificate of Need laws require healthcare providers to obtain approval from a state health planning agency before making major capital expenditures — building new facilities, purchasing expensive equipment, or significantly expanding services. The application process requires the provider to demonstrate that there is sufficient community need for the proposed service or facility, that existing providers cannot meet that need, and that the new capacity is financially viable.

Existing providers — primarily hospitals — typically have the right to intervene in CON applications and oppose proposals from would-be competitors. This is the feature most critics find objectionable: the system gives incumbents a formal mechanism to block competition, often under the banner of protecting community need.

A Brief History

CON laws were originally adopted at the federal level in 1974 under the National Health Planning and Resources Development Act, which required states to implement health planning programmes including CON review as a condition of receiving certain federal funds. The theory was that healthcare markets were different from normal markets — that oversupply would drive up costs rather than drive them down, as excess capacity would be filled through induced demand.

Congress repealed the federal mandate in 1986 after studies showed the laws were not achieving their cost-containment goals. States were free to repeal their own laws, and about 15 did. The remaining 35 states kept their CON programmes, which continue to operate today with varying scope and stringency.

Which States Have CON Laws?

The Arguments For and Against

What the Research Shows

The academic evidence on CON laws has grown substantially over the past decade and leans in a consistent direction. A 2020 Mercatus Centre study found that CON states had 30% fewer hospitals per capita, 14% fewer ambulatory surgery centres, and significantly fewer rural health clinics than non-CON states. Studies have found higher prices for common procedures in CON states, longer wait times for elective surgery, and lower hospital quality scores in some analyses.

Regulatory Capture — Who Sits on CON Boards?

One of the most consistent criticisms of CON programmes is the composition of the review boards that make approval decisions. In many states, sitting board members include representatives of existing healthcare providers — the very competitors that applicants are seeking to join. This creates an obvious conflict of interest. Studies of CON hearing records show that incumbent hospitals are the most common intervenors against applications and that intervention by an incumbent significantly reduces the probability of approval.

This dynamic — where an existing industry participant controls who can enter the market — is the textbook definition of regulatory capture. It is arguably more concerning in healthcare than in other sectors because the stakes for patients are higher and the ability to shop around for care is more limited than in typical consumer markets.

The Rural Hospital Argument — Is It Supported?

The most sympathetic argument for CON laws is their role in protecting rural hospitals, which often operate on thin margins and serve communities that would be left without care if the hospital closed. If an urban surgery centre can attract the most profitable patients from a rural hospital’s catchment area, the rural facility may no longer be financially viable.

However the evidence on this argument is mixed. Rural hospital closure rates are not consistently lower in CON states than non-CON states. Some researchers argue that CON laws actually harm rural access by preventing new entrants from serving rural communities that existing hospitals are not adequately serving. The Federal Trade Commission has argued that CON laws often reduce rather than protect rural access by blocking the development of outpatient facilities closer to patients’ homes.

Recent Repeal Activity

There has been a wave of CON reform activity in recent years. Florida significantly scaled back its hospital CON requirements in 2019. Georgia eliminated its CON programme for surgical facilities in 2021. Several other states have narrowed the scope of their programmes or expedited approval for certain facility types. The COVID-19 pandemic accelerated some reform efforts as states suspended CON requirements to allow rapid expansion of healthcare capacity — leading some policymakers to question why those requirements existed in the first place.

Explore Individual Certificate of Need Questions

Get plain-language answers to specific questions about CON laws — from how they affect the cost of dialysis in your state to why opening a new surgery centre requires government permission.