Why Certificate of Need (CON) laws do not make sense

State governments want to protect consumers from high healthcare costs. And one way they do this is by imposing certain regulations. One such common law is the Certificate of Need (CON) law.

Certificate of Need (CON) laws are rules that regulate the establishment or expansion of health care facilities. CON laws exist to restrict duplicative services and, therefore,  prevent rising health care costs.  States with CON laws require hospitals wishing to expand capacity to prove there is a need for their service.

Currently, 35 states and Washington DC maintain some form of a CON law.  Minnesota, while not officially considered a CON-law state is one of the 3 states with rules that function similarly to CON laws.

Minnesota has a hospital bed moratorium law that requires hospitals to get approval if they wish to add hospital beds. Minnesota requires the same of  Nursing homes, Immediate care facilities for persons with developmental disabilities, and radiation therapy facilities in certain locations.  Minnesota also requires any organizations trying to obtain a hospital license to get approval.

CON laws do not lower prices 

This is the logic behind CON laws: Hospitals incur fixed costs, and if they have too much capacity that they cannot fill, they will charge higher costs for used beds in order to cover those high costs, consequently driving up costs. CON laws are there to prevent overbuilding of capacity that will lead to such a  rise in costs.

Research, however, casts a doubt on the effectiveness of CON laws to lower costs. According to most studies, CON laws do not lead to low costs. Findings show that controlling for other factors “CON laws seem to limit access to healthcare, fail to increase the quality of care, and contribute to higher costs.”

Additionally, there is proof that repealing CON laws is highly beneficial to states.

Researchers have found that states that have removed these rules have more hospitals and more ambulatory surgery centers per capita. They also have more hospital beds, dialysis clinics, and hospice care facilities. Patients in non-CON states are more likely to utilize medical imaging technologies and less likely to leave their communities in search of care. Though CON advocates sometimes claim that the rules protect rural facilities, states without CON laws have more rural hospitals and more rural ambulatory surgery centers than states with CON laws.