Health Care Certificate-of-Need Laws: Policy or Politics?

Originally published by the Center for Studying Health System Change (HSC) as NIHCR Research Brief No. 4, May 2011.

Certificate-of-Need Laws: Regulatory Intent vs. Political Reality

Certificate-of-need (CON) programs were originally established to serve three purposes: ensuring access to health care services, maintaining or improving quality, and controlling capital expenditures on facilities and services. Over time, however, the CON approval process has evolved into something quite different from what regulators intended. A qualitative research study by the Center for Studying Health System Change (HSC) found that in many states, the CON process has become an arena where health care providers compete for service-line dominance and market share rather than a mechanism for rational planning of health care resources.

The study, authored by Tracy Yee, Lucy B. Stark, Amelia M. Bond, and Emily Carrier, drew on interviews with stakeholders in six states that maintained CON regulations: Connecticut, Georgia, Illinois, Michigan, South Carolina, and Washington. Respondents offered sharply different views about how well CON laws were achieving their stated goals of improving access, quality, and cost control.

Political Influence Over Policy Objectives

In five of the six states examined, all except Michigan, the CON approval process was described as highly subjective and heavily shaped by political relationships rather than grounded in data-driven policy analysis. Rather than evaluating proposals based on community health needs and projected service demand, the process often turned on which applicants had the strongest political connections or the resources to outlast competitors in lengthy regulatory proceedings.

Michigan stood out as an exception. Respondents there described a CON process that was more data-driven and less influenced by political maneuvering, though even Michigan's system was not without criticism. The variation across states highlighted how much the effectiveness of CON regulation depends on how a particular state chooses to implement and administer its program.

Mixed Views on Effectiveness

Stakeholder opinions on whether CON regulations actually improved access to care, maintained quality, or constrained unnecessary capital spending varied widely, even within the same state. Proponents argued that without CON regulations, providers would cluster profitable services in affluent areas while underserved communities would lose access. They also pointed to the potential for unchecked facility expansion to drive up overall health care costs through duplicative services and the well-documented tendency for supply of certain services to generate its own demand.

Critics countered that CON laws often protected incumbent providers from competition, limiting consumer choice and allowing existing facilities to maintain higher prices. They noted that the regulatory process itself could be expensive and time-consuming, creating barriers to entry that favored large, well-resourced health systems over smaller or newer competitors. Some respondents argued that the regulations had outlived their usefulness in a health care environment that had changed substantially since CON programs were first enacted.

A Preference for Reform Over Repeal

Despite widespread acknowledgment that CON programs were imperfect, most respondents across the six states believed the programs should remain in place rather than be eliminated. The consensus leaned toward reform: increased funding for evaluation of how CON decisions affect access and quality, improved monitoring of whether approved projects comply with the conditions attached to their certificates, and a deliberate shift toward a process driven more by data and community health planning rather than political influence.

The study's findings suggest that the core concept behind CON regulation, managing the supply and distribution of health care services to promote access and efficiency, retains broad support among stakeholders. The problem, in most states, lies in execution rather than principle. When the approval process is perceived as transparent, evidence-based, and insulated from political pressure, as in Michigan, stakeholders view the program more favorably. When the process appears to be driven by the political clout of applicants rather than the health needs of the community, confidence in the program erodes.

For states maintaining CON programs, the research points toward several practical improvements: strengthening the analytical foundation for CON decisions by investing in better data collection and health planning; building accountability mechanisms that track whether approved projects deliver on their promises; ensuring that the regulatory process is accessible to a range of applicants rather than favoring those with the deepest pockets or the best political connections; and revisiting which services and facilities should be subject to CON review as the health care delivery landscape evolves.

Sources and Further Reading

Yee, Tracy, Lucy B. Stark, Amelia M. Bond, and Emily Carrier, "Health Care Certificate-of-Need Laws: Policy or Politics?" NIHCR Research Brief No. 4, Center for Studying Health System Change (May 2011).

National Conference of State Legislatures, "Certificate of Need: State Health Laws and Programs."

American Health Planning Association, resources on state CON programs and health planning.