What is Certificate of Need?

A shortage of healthcare facilities can prevent patients from getting care when they need it. But when these shortages occur, can’t we just build new facilities to accommodate the clear demand? In many states, that’s not so easy—and certificate of need (CON) laws are to blame.

Certificate of need laws block new medical facilities from being built.

• A CON law requires that any would-be healthcare provider get approval from a state regulatory board to build a new treatment facility or expand an existing one.
• CON laws protect existing medical providers because they limit competition—while those who truly need help suffer the consequences.

Certificate of need laws keep many patients from getting the treatment and care they need.

• In many places, there is a shortage of healthcare facilities, and CON laws contribute to the problem.
• Even when there is a demonstrated need for more medical facilities, CON laws are used to protect the entrenched interests of medical providers already in the area.
• When it comes to mental health care, the situation is particularly dire for patients. In states where there is a shortage of medical facilities that can take a person having a mental health crisis, police officers are forced to crisscross the state to transport such patients to mental health facilities to get the treatment they need. But when small sheriff’s department can’t afford the time and financial commitment to transport patients, they instead lock these patients in jail cells for their own safety. It can take hours, days, or even weeks to get them the mental health treatment they need.
• The American Medical Association advocates repeal of CON laws. The AMA calls CON laws a “failed public policy.”

Designed to control costs, state certificate of need laws do the opposite—and some states have been catching on.

• Supporters of CON laws have said that they are meant to control costs by limiting the supply of services and facilities to only what is needed, as determined by the state board or agency. Requiring government approval will prevent overbuilding and excess capacity, which drive up costs, the thinking goes.
• But by eliminating competition from the healthcare industry, CON laws tended to drive up costs, lower quality, and limit the availability of needed services, according to a series of assessments from the U.S. Federal Trade Commission and Department of Justice.
• Congress linked federal funding to state passage of CON laws in 1974. By 1980, all states except Louisiana had them.
• Amid the growing evidence that CON laws were a failure, Congress repealed the directive to states in 1987. Today, thirty-eight states have CON laws on the books.

To truly work toward providing better patient care, states with CON laws should repeal them.

For more information about certificate of need laws:

• In September 2018, Goldwater Institute National Investigative Journalist Mark Flatten released a report about the negative impacts CON laws have had on mental health care. Read the full report here. Flatten wrote about the report in an op-ed for National Review Online.
• A Goldwater Institute video tells the story of one young mentally challenged man who ended up in a jail cell instead of the hospital bed he needed when he suffered a mental health crisis. His story shows how CON laws are keeping our mentally ill from getting the treatment they need.