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Proponents of certificate of need laws argue they incentivize the expansion of health services in rural communities and other areas that historically have had limited access to resources.

Repeal or Retool? States Assess Certificate of Need Laws

By Jack Pitsor and Anna Parham | Jan. 12, 2022 | State Legislatures News | Print

As state policymakers aim to ensure access to care and lower health costs, many are assessing whether long-standing certificate of need laws impede or support these goals.

Certificate of need laws, also known as CON laws, are state regulatory mechanisms for controlling the volume of health care resources in specific areas. In states with these laws, certain health care facilities must seek approval from a state agency before initiating a major capital expenditure or expanding their service capacity. A state agency then determines whether there is a community need for the new facility or services—or whether those services may go unused.

Currently, 35 states and Washington, D.C., have certificate of need laws, but the scope of state oversight varies significantly.

Currently, 35 states and Washington, D.C., have CON laws, but the scope of state oversight varies significantly. Most states with CON laws regulate many types of licensed health facilities, such as hospitals, nursing homes, outpatient clinics, hospices and others. Other states, like Ohio and Indiana, apply CON requirements only to long-term care facilities.

State CON laws are not without controversy. Proponents argue they incentivize service expansion in areas with historical access issues by preventing duplicative services in other areas. The laws, they say, can also help control health care costs by avoiding the addition of superfluous services.

Opponents counter that there is little to no evidence CON laws are effective—and that they have the opposite effects on access and costs. They see CON laws as anticompetitive and protective of incumbent providers. They also say the overly burdensome approval process might prevent health care facilities from establishing services in areas with access issues, such as rural communities.

Given these considerations, many states have recently enacted legislation modifying CON oversight. This includes pulling back CON requirements for certain facilities during and beyond the pandemic and revising existing CON programs to support rural and underserved communities.

Reducing Oversight During COVID

Many states, including Florida and Georgia, had been slowly repealing or pulling back CON oversight throughout the past few years. Relaxation of state oversight, however, happened in earnest as states responded to COVID-19, with at least 23 states temporarily waiving or expediting their approval processes during the pandemic. This was primarily out of concern that hospitals would quickly have to expand their bed capacity due to COVID-19 hospitalizations, and CON approval would delay or prohibit rapid expansion.

Looking forward, some states want to waive CON approval in certain circumstances permanently. Montana enacted sweeping reforms in its latest legislative session by exempting all but long-term care facilities from CON review.

Other states made more targeted modifications. North Carolina increased the dollar threshold for a proposed project triggering CON review. Tennessee exempted certain facilities, such as mental health facilities, and activities, including projects in low-income areas without a hospital, from CON approval. And Washington continued exempting psychiatric hospitals and beds from CON review.

Tailoring CON for Rural, Underserved Communities

Given well-documented access issues for residents living in rural areas, many states have created certain exemptions or flexibilities for rural health providers. Maine and Oregon exempted rural hospitals from their CON laws, and Georgia waived the requirement that rural hospitals pay a fee when applying for CON approval. Washington enacted legislation in 2020 removing rural health clinics from the list of facilities under CON purview.

Beyond pulling back CON review in rural areas, some states are tailoring requirements to specifically address access issues and health disparities in rural and other underserved communities. At least 25 states include health equity criteria when reviewing and approving health facility proposals. For example, Iowa CON officials must consider how a proposed activity would meet the needs of the medically underserved, rural residents, low-income individuals, racial and ethnic minorities, people with disabilities and the elderly. When a safety-net hospital in Illinois sought CON approval to close, the state required it to continue operating some level of services in the surrounding low-income community.

Other states, including Delaware, North Carolina and Virginia, require health facilities to adopt financial assistance policies for patients unable to pay for services as a condition of CON approval. Connecticut recently approved a hospital acquisition, with the stipulations that the facility maintain a charity care policy for Medicaid and indigent patients and submit to the state a community health needs assessment with implementation strategies, among other requirements.

Jack Pitsor is a policy associate and Anna Parham was an intern in NCSL’s Health Program.

This resource is supported by the Health Resources and Services Administration of the U.S. Department of Health and Human Services as part of an award totaling $767,749, with 100% funded by HRSA/HHS. The contents are those of the author(s) and do not necessarily represent the official views of, nor an endorsement by, HRSA, HHS or the U.S. Government.

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