Certificate-Of-Need Laws Are Crumbling—And Patients Should Cheer

Tennessee just delivered one of the clearest signals yet that the era of certificate-of-need protectionism may be ending. In April 2026, the state enacted SB 1369, which phases out CON requirements for most acute-care hospitals by 2030 and ends them earlier for freestanding emergency departments and cardiac catheterization facilities. The law replaces the old permission-slip regime with a straightforward licensure process that still requires hospitals to treat Medicaid patients and provide comparable charity care.

What Are Certificate Of Need Laws And Why Should Patients Care About Them?

Certificate of need laws are state regulatory programs that require healthcare providers to obtain government approval before constructing new facilities, expanding existing ones, adding beds or services, or purchasing major medical equipment, with the original goal of controlling costs by preventing unnecessary duplication of services. Approximately 35 states plus Washington, D.C. still maintain some form of CON regulation as of 2025–2026, though the scope varies widely by state; Alabama retains a relatively comprehensive program administered by the State Health Planning and Development Agency. While proponents argue these laws protect rural hospitals and curb excess capacity, a substantial body of research finds that CON laws often restrict competition, limit access to care, and fail to lower (and in many cases increase) healthcare costs and spending. Critics, including the FTC and multiple economic reviews, note that the laws effectively allow incumbent providers to block new entrants, reducing market competition without delivering the promised cost or quality benefits.

Patients should care about CON laws because these regulations limit the number of hospitals, surgery centers, and specialized services available in their communities. By requiring existing providers to approve new competitors, CON laws reduce choices, lengthen wait times, and keep prices higher than they would be in a more competitive market—directly affecting how quickly and affordably patients can get the care they need.

What Do Certificate Of Need Laws Actually Look Like In Practice?

It’s easier to step outside of healthcare.

Imagine Tony’s Original Pizza Palace has to file a formal Certificate of Need application to open a second location in the town next door. They focus on calzones and New York style pizza. The town’s existing pizza shops—Dominick’s Deep Dish, Mama Rosa’s Thin Crust, and even the gas-station slice counter—all get official notice and show up at the public hearing to argue that the community already has “sufficient pizza capacity.” They present charts showing average wait times for a large pepperoni, claim another oven would “destabilize the local dough market,” and demand Tony prove that the new store won’t steal their customers or cause excess mozzarella consumption. After eighteen months of hearings, consultants, and legal fees, the town board finally decides there is no demonstrated “need” for more pizza and denies the application, leaving Tony’s second location as an abandoned dream while the same three shops increase their price from $24 to $26 for a medium pie.

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It doesn’t make economic or rationale sense to ask competing entities if they would like more or less competition.

Arc Of Reform Is Moving Away From Certificate Of Need Laws

According to the National Conference of State Legislatures, roughly 35 states and the District of Columbia still operate some form of CON program. Yet nearly half of those states have told the federal government they intend to loosen or eliminate their rules, often as part of applications for Rural Health Transformation Program grants. South Carolina has already repealed most CON requirements except for nursing homes. North Carolina has exempted ambulatory surgery centers in larger counties and continues to debate broader repeal. Alabama lawmakers, including Sen. Larry Stutts, have advanced proposals to limit the power of the state’s CON Review Board.

The original theory behind CON laws was straightforward: restrict supply so that hospitals would not overbuild, thereby controlling costs and ensuring access for the poor. Four decades of evidence show the opposite. A large body of research compiled by the Mercatus Center finds that CON regimes are associated with fewer hospitals, fewer hospital beds, fewer ambulatory surgery centers, fewer dialysis clinics, and reduced access to medical imaging. Patients in CON states travel farther for care. Rural communities suffer particularly, with fewer rural hospitals and substitutes available.

On costs, the data are equally damning. Multiple studies show higher per-unit prices and higher overall spending in CON states. By blocking new entrants—especially physician-led ambulatory surgery centers and specialty hospitals—these laws protect incumbent systems from competition. The result is precisely the higher prices and lower innovation that free-market advocates have long predicted.

For practicing surgeons, the practical effects are concrete. In states with strict CON rules, opening or expanding an ambulatory surgery center often requires navigating a multi-year process in which existing hospitals can formally oppose the application. Capital is diverted from patient care into legal and consulting fees. Capacity remains artificially constrained even as demand for outpatient procedures grows.

In Support of Certificate Of Need Laws

Proponents of Certificate of Need laws argue that unrestricted expansion of hospitals and specialty facilities can lead to costly overbuilding, higher overall system expenses, and the closure of essential community hospitals that serve rural or low-income populations. By requiring providers to demonstrate community need before adding beds, operating rooms, or expensive equipment, CON programs aim to channel resources toward genuine gaps in care rather than duplicative services that primarily attract well-insured patients. In this view, the regulatory check prevents “cream-skimming” by physician-owned ambulatory centers and specialty hospitals, thereby protecting the financial stability of full-service hospitals that maintain emergency departments, trauma care, and uncompensated services.

Supporters further contend that CON laws promote more rational planning and better geographic distribution of services. Without such oversight, new facilities tend to cluster in affluent suburban markets while underserved rural and inner-city areas remain neglected. By giving state agencies and local stakeholders a formal role in evaluating proposed projects, the process can encourage investments that improve access for vulnerable populations and avoid the waste of scarce capital on underutilized capacity. Although imperfect, advocates maintain that these laws remain a necessary tool for balancing market forces with the public interest in an equitable and sustainable healthcare system.

What Are the Next Steps For Certificate Of Need Laws?

The next steps on Certificate of Need reform are straightforward: state legislatures should systematically repeal or sharply narrow CON requirements, starting with ambulatory surgery centers, imaging, and outpatient services where competition is most restricted; lawmakers can model successful reforms already enacted in states that have eliminated ASC-specific CON rules and seen rapid growth in facilities without harming hospital viability; at the same time, advocates should continue documenting local access delays and cost data, file targeted legal challenges where the process functions as a competitor’s veto, and press governors and health departments to stop defending outdated supply-control regimes that no longer serve patients.