What if starting a hospital required state permission—not to meet safety standards, but to prove there weren’t “too many” already? That’s exactly how it works in most of the country where healthcare providers still have to ask government planners for approval before they can open, expand, or even upgrade equipment—regardless of patient demand. It’s a slow, costly, and outdated system that props up incumbents and blocks new care from reaching those who need it.
Certificate of Need (CON) laws are state-level regulations that require healthcare providers to obtain government approval before opening or expanding facilities. Originally intended to control healthcare costs and prevent duplicate services, these laws have become a barrier to entry for new competitors and the expansion of existing providers. While CON laws most commonly apply to hospitals and long-term care facilities, they can also be extended to services like mental health clinics, substance abuse treatment centers, outpatient surgical centers, ambulance services, and even medical imaging equipment—suppressing competition across the healthcare sector in many states.
The original rationale, first articulated in in New York in 1964 and later adopted federally, was to reduce costs by limiting high fixed-cost investments and to concentrate patients in higher-quality facilities. The theory was that by limiting “unnecessary” spending on duplicative equipment and services, providers would become more efficient and quality would improve.
Although a few states set up CON laws on their own, most did so under federal pressure. In the 1970’s, the federal government began requiring states to review major healthcare expenditures and threatened to explicitly withhold funding from those without CON laws. By 1980, 49 states had enacted such rules. The federal CON law mandate was repealed in 1987 and some states automatically rolled their CON laws back—but many did not, leaving outdated and burdensome restrictions on their healthcare providers.
In reality, neither reduced prices nor higher quality came from these laws. CON laws suppress the supply of healthcare and suppress market competition—driving prices up while limiting patients’ access to healthcare. Research doesn’t show a quality benefit of CON laws and in some cases CON laws result in lower quality care.
Despite this, most states have not fully repealed their CON laws. Only 12 states have done so completely, while the majority retain restrictions on at least some healthcare services.
Some states are working to change that. North Carolina and West Virginia have full repeal bills currently pending in their legislatures. If passed, they would remove major roadblocks to care. Alabama is considering targeted exemptions for obstetrics and psychiatric facilities which would be a smaller, but still positive step.
Unfortunately, other states are moving in the wrong direction. Connecticut is expanding CON regulations to cover private equity investments in health facilities and making CON restrictions harsher overall, while at the same time trying to expedite CON approvals. Rather than trying to tweak a broken system, the state could instead allow healthcare providers to expand as needed—which would also save taxpayer money.
Maryland is ending exemptions for substance abuse treatment centers, limiting their ability to treat more patients. Based on the evidence from other states, both Connecticut and Maryland will only increase the cost of healthcare and make it less accessible to those who need it.
Patients deserve choice. They deserve a system where providers compete to deliver the best care at the lowest cost. Increasing competition—not restricting it—is how to improve prices and patient outcomes. Giving counter-productive CON programs even more control over healthcare will only raise prices and prevent patients from having the options they need. State legislators should free their healthcare markets and make room for new competition.
Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization that advocates for consumers through evidence-based analysis and data. Follow Justin on X @JustinLeventhal.