By Maggy Tieche
When healthcare systems and hospitals are looking to expand their facilities or service lines through construction and renovation, many states require an approval process to ensure that the needs of the local communities are met.
What is a certificate of need in healthcare?
Certificates of need (CONs) are legal documents that hospitals, health systems, and other healthcare provider organizations must submit to their state regulatory agency in advance of making proposed changes to any new or existing medical facility.
These changes can include new construction, equipment acquisitions, or notice of facility renovations, relocations, recertifications, and closures.
In this blog, we explore the certificate of need process, the history of the CON state requirements, and certificate of need pros and cons.
What is the purpose of certificate of need laws?
According to the National Conference of State Legislatures (NCSL), certificate of need laws are intended to control and reduce healthcare costs by restricting service duplication and ensuring the project will meet current community needs.
However, CON laws are seen as fairly controversial issues in state-level healthcare policy. Why? Not all states abide by CON laws.
What is the history of CON laws?
New York was the first state to adopt CON laws in 1964, as a way to review capital expenditures and regulate some hospital service expansions. Within the next decade, a total of 26 states enacted CON laws of their own. And by 1974, CON laws were mandated by the federal government.
Over time, however, some states found that CON laws do not necessarily help effectively reduce healthcare spending. A handful of states began repealing their CON laws in the early 1980s and the federal mandate was formally repealed in 1987.
How many states require hospital certificates of need?
As of August 2023, 35 states and Washington D.C. have some type of CON laws still in effect.
Which states require certificates of need?
Tracked by the National Conference of State Legislatures (NCSL), the 35 states and one federal jurisdiction that have CON laws include:
- District of Columbia
- New Jersey
- New York
- North Carolina
- Rhode Island
- South Carolina
- West Virginia
States that don’t require a CON
The states without CON laws are:
- New Hampshire
- New Mexico
- North Dakota
- South Dakota
*denotes CON state program
Arizona, Minnesota, and Wisconsin do not have official CON laws but have other healthcare related application processes in place.
How many hospital CONs are submitted each year?
Between 2018 and 2022, the Definitive Healthcare HospitalView product has tracked an average of 2,200 hospital CONs a year. As of August 2023, nearly 1,800 CONs have been captured for the year.
Number of hospital certificates of need 2018-2023
Fig. 1 Data is from the Definitive Healthcare HospitalView product. Accessed August 2023.
The benefits of CON laws
The intention of CON laws, in addition to helping maintain or reduce healthcare spending, is to also minimize duplicative services or oversaturating a market. Unneeded medical facilities or services could lead to losses for the local health systems.
In addition, supporters of CON laws say that the programs help to:
- Maintain a smaller volume of healthcare facilities that provide quality care
- Distribute care access to disadvantaged populations, or other geographic areas not served by existing medical facilities
- Invite public or stakeholder input regarding proposed changes to new or existing community services
The cons of CON laws
While cost reduction for both patients and providers has always been the end goal of CON programs, many face criticism from economists and business advocacy groups who believe the rules can stifle competition among healthcare systems and facilities.
Some say political influence may protect established healthcare systems and restrict new entrants. And then by restricting competition among local healthcare providers, CON laws can actually drive up the cost of available medical services and potentially limit care options for patients.
Another criticism of the CON program is that it attempts to assign objective value to a subjective assessment of a facility’s community value. Some identified shortcomings in the structure and organization of CON laws include that they:
- Vary from state to state, which can result in inconsistencies in management
- Allow room for political sway and subjectivity to inadvertently influence decisions regarding which facilities will be built
- Aren’t well-suited to objectively identify the “best interests” of a community
Though the future of CON laws is uncertain, the debate surrounding these healthcare processes remains an important point of discussion for healthcare cost-containment strategies, methods of preserving quality care, and addressing community health priorities.
Despite the controversy, hospital certificates of need provide a wealth of information for real estate and construction firms that market and sell to healthcare facilities. With healthcare commercial intelligence from the Definitive Healthcare platform your team can more efficiently segment and target the right accounts.
Need more information? Read about the data available in our HospitalView product, discover which hospitals are the largest facilities in the country, or get in touch with us today.