Certificate of Need Laws Are a Government Permission Slip for Higher Medical Prices

What are Certificate of Need laws and where do they still apply?

Certificate of Need laws require health care providers to get state approval before they build new facilities, buy major equipment, or expand services in a community. Thirty-five states and the District of Columbia still enforce these statutes, using them to restrict the supply of hospital beds, imaging machines, and operating rooms. And the rest of the country has moved on.

The first statewide program passed in New York in 1964. The federal government made CON a condition for Medicaid and health planning grants in 1974, and most states adopted versions quickly. Congress repealed the federal mandate in 1987, yet many state legislatures kept the rules on the books. They are now a patchwork of incumbent protection dressed up as planning.

The National Conference of State Legislatures maintains a current map of CON statutes. It shows that states such as Georgia, North Carolina, and Virginia require approval for everything from nursing home beds to linear accelerators. California and Texas largely repealed their programs decades ago. And the split is not partisan. It is a test of whether a state trusts markets or boards.

Applicants face hearings, legal fees, and delays that can stretch past eighteen months. Incumbent hospitals often argue that new competitors would duplicate services and drain paying patients. Regulators then deny the application. The would-be competitor never opens. Existing providers keep their captive market.

Who pays the price when competition needs a government note?

Patients pay through higher prices, longer drives, fewer appointments, and stagnant quality when state boards block new competitors. The Federal Trade Commission and the Department of Justice have repeatedly told state lawmakers that CON laws shield existing providers from competition and inflate costs for imaging, surgery, and long-term care. And the losers are rural families and independent physicians.

The Mercatus Center at George Mason University studied CON states using data from the American Hospital Association and the Census Bureau. It found that states with CON programs had fewer hospital beds per capita, fewer magnetic resonance imaging machines per capita, and lower numbers of ambulatory surgery centers. A 2016 joint report by the FTC and DOJ estimated that CON laws could increase prices for some procedures by roughly 5 percent. Those numbers translate directly into premiums and out-of-pocket bills.

Small medical practices suffer the most. An independent imaging center or outpatient clinic cannot afford the lawyers and economists needed to survive a contested CON hearing. Large hospital systems can. So the law sorts competitors by political clout rather than quality or price. Independent doctors sell out to hospital networks or leave the state.

The American Medical Association has tracked growing consolidation. Hospital mergers and acquisitions reached 53 announced deals in 2022, according to data from Kaufman Hall. Many of those deals happened in CON states where independent practices had few growth options. Consolidation then gives systems the leverage to raise prices even further. The cycle feeds itself.

What the evidence from repealing states actually shows

States that repealed Certificate of Need laws saw more providers, more competition, lower prices, and faster adoption of new technology. Research published by the Mercatus Center and other policy shops found that non-CON states had more hospital beds per capita and more accessible imaging services than otherwise similar states. The pattern is consistent across decades.

North Carolina loosened its CON rules for certain psychiatric and substance abuse beds in 2015. Providers added capacity. Wait times for inpatient mental health treatment fell in some counties. That is a market response to a real need, not a planning board guessing five years ahead.

Pennsylvania repealed its CON program in 1996. Since then, the state has developed a robust market for ambulatory surgery centers and independent diagnostic testing. Prices for common outpatient procedures grew more slowly than in neighboring CON states, according to industry analyses. Patients gained choices. Employers gained leverage.

Florida scaled back its CON law in 2019. New hospitals and specialty facilities entered markets that had been dominated by a handful of systems. The state did not descend into a chaos of empty buildings. It saw investment. That outcome contradicts the lobbyists who warn that unplanned capacity wastes resources.

A state level repeal agenda for 2026

Repeal is a statehouse fight, and the 2026 legislative session offers a fresh chance to move bills in capitals that have dragged their feet for decades. Lawmakers should start by sunsetting CON requirements for imaging, ambulatory surgery, and mental health beds, where restrictions cause the most visible patient harm. Those categories show the strongest evidence of cost relief.

Next, states should adopt certificate-of-need reciprocity or full repeal for rural health clinics. Rural Americans already drive too far for basic care. Letting a qualified provider open without begging a board would shorten those trips. The federal government can help by conditioning rural health grants on repeal of CON barriers.

Third, governors should order their attorneys general to challenge CON laws under state constitutional provisions that protect economic liberty. The Institute for Justice has litigated similar cases, including suits in Kentucky and Virginia. But a favorable ruling can strike down a program faster than a legislature can rewrite it.

Washington should also get out of the way. The FTC and DOJ should update their 2016 guidance and send clear letters to state medical boards and legislatures. The message should be simple. Antitrust law exists to protect consumers from exactly the kind of supply restriction that CON statutes mandate.

Health care does not need more permission slips. It needs more doctors, more clinics, more imaging centers, and more competition. Certificate of Need laws were sold as cost control. They became a moat around the incumbents. It is time to fill it in.