Certificate of Need State Laws

State Actions Summary

In the past several years, many states have introduced or enacted legislation to modify their CON programs. Changes range from fully repealing an existing CON program to creating a new CON program. However, most state legislation makes targeted changes to CON oversight, such as excluding specific facilities from CON review.   

Intent and Structure of CON

A primary objective of state CON laws is to control health care costs by avoiding unnecessary expansion or duplicative services within an area. Proponents of CON laws contend that if excess health care service capacity exists, price inflation may occur to compensate for new, underused health care services or empty beds. Some states also require CON approval for health facility mergers, acquisitions or changes in ownership, which many researchers say contributes to higher health care costs and prices.

Beyond cost containment efforts, CON laws aim to ensure access to services for historically underserved communities, such as rural areas, and meet the health care needs of indigent patients. For example, some states require health facilities to establish financial assistance policies and provide discounted care to low-income patients as a condition for CON approval.

While proponents of CON argue the state laws achieve these aims, many opponents argue CON laws have the opposite effect on health care costs and access to quality health services. Opponents believe CON laws stifle competition by protecting incumbent providers and creating a burdensome approval process for establishing new facilities and services. Additionally, many maintain there is little to no evidence that CON laws deliver on controlling health care costs, improving quality or ensuring access to health care services for patients.  

The structure of CON review and approval varies state to state, but generally a health care facility must seek state approval—through a state health planning agency, department of health or a CON council appointed by the governor or legislature—based on a set of criteria and community need. These state entities often look at criteria such as:

• The projected need for the health care service within the area.
• Whether a facility has the staff capacity or financing for a proposed activity.
• The effects of a proposed project on specific populations (e.g., rural communities).
• The effects of a proposed project on health care costs.  

Once a health facility has applied for state approval, the state may approve, deny or set certain limitations on a health care project.

History

New York was the first state to enact a CON law in 1964; 26 states enacted CON laws throughout the following decade. Early CON programs typically regulated capital expenditures greater than $100,000, facilities expanding bed capacity and facilities establishing or expanding health care services.

In 1972, several states adopted Section 1122 waivers, which provided federal funding to states regulating new health care services receiving Medicare and Medicaid dollars. Congress then passed the National Health Planning and Resources Development Act of 1974 bolstering federal funding for state and local health planning regulations.

The federal law required states to adopt CON laws similar to the federal model resulting in all states, except Louisiana, with some form of a CON program by 1982. This meant states had broad regulatory oversight over several facilities—including hospitals, nursing and intermediate care facilities, and ambulatory surgery centers—as well as the expansion or development of a facility’s service capacity. 

The federal mandate was repealed in 1987, along with the associated federal funding. Subsequently, several states repealed or modified their CON laws.