A certificate of need (CON) is a state-issued approval that healthcare providers must obtain before opening a new facility, expanding an existing one, or purchasing major equipment. Currently, 35 states and Washington, D.C., operate CON programs, though the specific services regulated and the strictness of the process vary widely from state to state.
These laws exist to prevent oversaturation of healthcare services in a given area, but they’ve become one of the most debated policies in American healthcare. Understanding how they work, what they cost, and who they affect can matter whether you’re a healthcare professional, a patient in a rural area, or simply trying to make sense of why your region has limited options for certain medical services.
How CON Laws Work
The basic concept is straightforward: before a hospital can add beds, a surgeon can open an outpatient surgery center, or a company can launch a home health agency, the state must first agree there’s enough demand to justify it. A state review board evaluates each application against several criteria, the most important being whether the surrounding population actually needs the proposed service. Reviewers also consider whether a cheaper or more effective alternative already exists, whether the applicant has the financial resources to sustain the project long-term, and whether adding the new service would drive up healthcare costs in the area.
The types of services that require approval depend on the state. Common examples include hospital construction, nursing homes, outpatient surgery centers, home health agencies, hospice facilities, kidney dialysis centers, and high-cost imaging equipment like MRI and CT scanners. Some states regulate dozens of service categories; others cover only a handful.
Origins of the Program
CON laws trace back to 1974, when Congress passed the National Health Planning and Resources Development Act, which effectively mandated that every state establish a CON program. The logic at the time was that unregulated growth in healthcare would lead to excess capacity, which would in turn drive up costs for everyone. If a city already had enough hospital beds, the thinking went, allowing another hospital to open would simply spread patients thinner and force all facilities to charge more to cover their overhead.
Congress repealed the federal mandate in 1987, giving states the choice to keep or discard their programs. Fifteen states have since eliminated their CON laws entirely, while the remaining 35 and D.C. have kept them in various forms.
The Application Process
Applying for a certificate of need is neither quick nor cheap. The process typically begins with a letter of intent, followed by a detailed application that lays out the project’s scope, financing, projected patient volume, and how it addresses community health needs. State health departments then open a review period during which existing providers, community members, and other stakeholders can weigh in, often including formal hearings.
Timelines vary, but they tend to be lengthy. Virginia’s legislature directed its health department to get average review times down to 120 days or fewer, a target that required specific regulatory changes to achieve. In practice, contested applications can drag on much longer, especially when existing providers challenge a competitor’s proposal through hearings and appeals.
The fees alone can be substantial. In Washington State, filing fees range from about $20,000 for an ambulatory surgery center to over $46,000 for a nursing home application. Hospital applications cost roughly $40,000. Even requesting a simple exemption can run between $1,300 and $8,300, and those fees are nonrefundable. If an applicant withdraws partway through the review, they may recover only 50% to 75% of their fees, or nothing at all if the process has advanced far enough.
The Competition Problem
The most persistent criticism of CON laws is that they protect existing healthcare providers from competition. The U.S. Department of Justice has stated plainly that “CON laws create barriers to entry and expansion to the detriment of health care competition and consumers.” The concern isn’t theoretical. During federal hearings on the issue, regulators gathered evidence that existing competitors routinely use the CON process to forestall new entrants from reaching their market.
Here’s how it plays out in practice: when a physician group applies to open a new surgery center, the dominant hospital system in the area can challenge the application, triggering lengthy hearings and appeals. Both sides end up diverting money from patient care into legal fees, consulting, and lobbying. In some cases, the delays and costs are enough to kill the project entirely. The result is that patients in CON states often have fewer choices for where to receive care, particularly for services like outpatient surgery, radiation therapy, and specialty hospitals.
Proponents counter with what’s known as the “cherry-picking” argument: without CON protections, new facilities would attract the most profitable, well-insured patients, leaving existing hospitals with a disproportionate share of uninsured and underinsured patients. That financial strain could push some hospitals, especially those serving vulnerable populations, toward closure.
Impact on Costs and Access
The evidence on whether CON laws actually control costs is mixed at best. One broad analysis estimated that the total costs of maintaining CON programs exceed their benefits by roughly $302 million per year nationally, with a cost-benefit ratio of 1.08, meaning every dollar of benefit costs $1.08 to achieve. A study of cataract surgery reimbursement found that average per-procedure payments were slightly lower in CON states ($1,501) than in non-CON states ($1,552), but the difference was modest, and utilization dropped more steeply in CON states as well.
The effects on access are more striking. A comprehensive review found that 82% of tests examining service availability showed that CON states have lower availability across the board, including hospitals, surgery centers, psychiatric care, home health agencies, cancer treatment, dialysis, and substance abuse clinics. States with CON programs had roughly 30% fewer rural hospitals than states without them. Patients in CON states were also less likely to receive certain procedures like medical imaging, knee replacements, and cardiac surgery. A 2016 study found that CON laws specifically reduced access to MRI and CT scanning in non-hospital facilities.
Perhaps most critically for rural communities, CON laws have not prevented hospital closures, which was one of their original justifications. Rural hospitals have closed at similar rates regardless of whether a state maintains a CON program.
Recent Reforms and Repeals
The trend in recent years has been toward loosening or eliminating CON requirements. Montana repealed its CON law in 2021 and has since seen a 12.5% increase in the number of ambulatory surgery centers, home health agencies, and inpatient addiction treatment centers. North Carolina moved toward a near-total repeal by January 2025. As an interim step, surgery centers in counties with populations over 125,000 became exempt from CON approval starting in November 2023, which quickly spurred new facility development in high-demand areas.
Other states have taken a more targeted approach. Georgia passed reforms in 2024 that exempt certain single-specialty ambulatory surgery centers from review, provided they’re owned by a single physician or practice and stay below specific capital expenditure and operating room thresholds. This kind of partial reform reflects the political reality that full repeal often faces strong opposition from hospital systems that benefit from the competitive protections CON laws provide.
The states that have eliminated their CON programs entirely include Arizona, California, Colorado, Idaho, Kansas, Minnesota, New Hampshire, New Mexico, North Dakota, Pennsylvania, South Dakota, Texas, Utah, Wisconsin, and Wyoming. For anyone operating in or considering healthcare investment in the remaining 35 states and D.C., the CON process remains a significant factor in planning timelines, budgets, and competitive strategy.