A certificate of need (CON) is a government approval that healthcare providers must obtain before they can build a new facility, expand an existing one, or offer certain new services. Currently, 35 states and Washington, D.C., require some form of CON review. The basic idea: before spending money on new healthcare capacity, a provider has to prove to a state regulatory board that the community actually needs it.
How CON Laws Work
If a hospital wants to add a new wing, a company wants to open a home health agency, or a clinic wants to install expensive imaging equipment, it may first need to submit a formal application to a state review board. That application must demonstrate two things: that the proposed project fills a genuine gap in local healthcare, and that it is financially feasible. The review board then evaluates the proposal against criteria like existing capacity in the area, population health data, and whether the project would improve access for underserved communities.
If the board decides the community already has enough of that service, or that the applicant’s finances don’t add up, it can deny the permit. Competitors in the area can also weigh in during the review process, sometimes arguing that a new entrant would undermine existing providers. The whole process can take months.
Why These Laws Exist
CON laws are designed to accomplish three things: contain healthcare costs, prevent unnecessary duplication of services, and steer new facilities toward the communities that need them most. The logic rests on a quirk of healthcare economics. Unlike most industries, where more competition drives prices down, healthcare spending can actually rise when providers duplicate expensive services in areas that are already well served. A second MRI machine in a small town, for example, might lead both facilities to run scans at low volume while passing the overhead costs along to patients and insurers.
Congress formalized this idea in 1974 with the National Health Planning and Resources Development Act, which pushed states to adopt CON programs by threatening to withhold federal funds from any state that didn’t have one. By the early 1980s, nearly every state had a CON program in place. Congress repealed the federal mandate in 1987, leaving the decision entirely to individual states. About a third of states eventually dropped their CON requirements, but the majority kept them.
What Services and Facilities Are Covered
The specific services that trigger a CON review vary widely from state to state. Some states regulate only a handful of categories, while others cast a broad net. Common examples include new hospital construction, nursing homes, home health agencies, psychiatric facilities, rehabilitation centers, ambulatory surgery centers, and major medical equipment purchases. Some states set dollar thresholds: any capital expenditure above a certain amount automatically requires CON review, regardless of the type of project.
This variation means a healthcare company might face no regulatory barrier to opening a facility in one state while needing months of approval in a neighboring state for the exact same project.
The Debate: Do CON Laws Help or Hurt?
Few healthcare regulations are as contested as CON laws. The arguments on both sides are backed by real data, and the picture is genuinely mixed.
The Case for CON Laws
Supporters argue that CON programs protect rural and underserved areas. Without them, new providers would cluster in wealthy, profitable markets while leaving smaller communities behind. There’s also evidence that concentrating patients into fewer facilities can improve efficiency. A study of home health agencies found that per-patient costs were lower in states with CON laws, roughly $4,072 per patient compared to $5,292 in states without them. The explanation is straightforward: fewer agencies means each one serves more patients, which can reduce overhead like travel time between visits.
Some research on hospital outcomes supports the concentration argument as well. CON states with large metropolitan areas have been found to have lower infant mortality rates than comparable non-CON states, possibly because high-risk deliveries are channeled to better-equipped hospitals rather than spread across many smaller ones.
The Case Against CON Laws
Critics counter that CON laws function as a barrier to competition, protecting incumbent providers from new entrants. When the number of providers shrinks, the remaining ones gain market power. That same home health study found that while per-patient costs dropped, total costs rose dramatically. Agencies in states with home health CON laws had average total costs of nearly $3 million, compared to about $1.5 million in states without them. The reason: agencies in CON states served far more patients per agency (928 versus 371), suggesting that reduced competition may enable existing providers to expand their caseloads beyond what a competitive market would produce.
On quality, the evidence is largely a wash. Studies comparing mortality rates for common procedures like heart bypass surgery between CON and non-CON states have produced conflicting results. Some found lower mortality in CON states, others found no difference, and at least one found that mortality rates improved after a state repealed its CON law. Rehospitalization rates and overall healthcare expenditures also show no consistent difference between the two groups.
Which States Still Have CON Laws
As of January 2025, 35 states and Washington, D.C., maintain CON programs. The states include Alabama, Alaska, Arkansas, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, and West Virginia.
The remaining 15 states have either repealed their CON laws entirely or let them expire after the federal mandate was lifted in 1987. Several states have also narrowed their programs over time, removing certain services from the CON requirement while keeping others.
What This Means if You’re a Patient
For most people, CON laws operate in the background. You won’t encounter the process directly unless you’re trying to start or expand a healthcare business. But the effects can shape your experience as a patient in subtle ways. In a CON state, you may have fewer choices for services like home health care, nursing homes, or outpatient surgery, but the providers that do exist may operate at higher volume and lower per-patient cost. In a non-CON state, you may have more options, but that doesn’t automatically translate to lower prices or better care.
If you’re evaluating healthcare options in your area and wondering why a certain type of facility seems scarce, or why a new provider hasn’t entered your market, CON regulations are often part of the answer.