After CON: What Happens When States Repeal or Modify Their Certificate of Need Requirements in Health Care?

Category: Print Issues

After CON: What Happens When States Repeal or Modify Their Certificate of Need Requirements in Health Care?

Matthew Mitchell & Stephen Slivinski

Volume 32

, Issue 3

32 GEO. MASON L. REV. F. 627

Introduction

This Article proceeds in three parts. Part I provides a brief background on CON laws and describes their intended effect. Part II examines literature in the certificate of need (“CON”) law field, summarizing hundreds of tests and rebutting the argument that states that eliminate CON laws risk raising spending, limiting access, and undermining quality. Part III analyzes the effect of Florida’s CON law reforms on the number of health care services throughout the state.

I. The Role of CON Laws in Health Care Systems

In jurisdictions where a CON is required, would-be service providers must obtain permission from the government before opening or expanding their facilities, making certain capital investments, or offering particular services. The rules cover more than thirty services and technologies from hospital beds and hospice care facilities to dialysis clinics and drug-use treatment centers.¹ Table 1 lists the services and technologies that are regulated through CON and the frequency with which they are regulated, while Figure 1 shows the number of services and technologies that require a CON in each state. The most common CON requirements are for nursing homes, psychiatric services, and hospitals, while the least common requirements are for air ambulances, ultrasounds, and subacute services.

New York was the first state to require a certificate of need in health care in 1964.² Within ten years, twenty-six additional states had enacted similar requirements.³ Then, in late 1974 Congress passed the National Health Planning and Resources Development Act encouraging states to adopt CON regulations by threatening to withhold federal funds from any state without such a program.⁴ By the mid-1980s, however, scholars had accumulated evidence that CON laws were creating more problems than they solved.⁵ So in 1986, Congress eliminated the federal inducement.⁶

Today, thirty-nine states require a CON for at least one health care service or technology.⁷ But many of these are relatively limited programs. For example, Arizona, Minnesota, and New Mexico require CONs only for ambulance services, while in Indiana and Ohio CONs are required only for nursing homes.⁸ Thirty states require a CON for four or more services or technologies, and given recent reforms in South Carolina and Oklahoma, that number will soon grow.⁹

Table 1: Health Care Services and Technologies Requiring a Certificate of Need¹⁰

Service or Technology	Number of States that Require a CON
Nursing Home Beds/Long-Term Care Beds	34
Psychiatric Services	31
New Hospitals or Hospital-Sized Investments	29
Intermediate Care Facilities (ICFs) for Individuals with Intellectual Disabilities	28
Hospital Beds (Acute, General, Med-Surg, etc.)	27
Long-Term Acute Care (LTAC)	25
Ambulatory Surgical Centers (ASC)	24
Cardiac Catheterization	24
Rehabilitation	24
Substance/Drug Abuse	24
Open-Heart Surgery	22
Radiation Therapy	21
Magnetic Resonance Imaging (MRI) Scanners	20
Positron Emission Tomography (PET) Scanners	19
Neonatal Intensive Care	18
Organ Transplants	18
Home Health	17
Obstetrics Services	16
Computed Tomography (CT) Scanners	15
Hospice	15
Linear Accelerator Radiology	15
Mobile Hi Technology (CT, MRI, PET, etc.)	15
Renal Failure/Dialysis	13
Assisted Living & Residential Care Facilities	10
Burn Care	10
Swing Beds	10
Birth Centers	9
Lithotripsy	9
Gamma Knives	8
Ground Ambulance	8
Air Ambulance	6
Ultrasound	2
Subacute Services	1

Figure 1: Number of Health Care Services in Which a CON is Required (2025)¹¹

A. What Are CON Laws Supposed to Achieve and Should We Expect Them to Achieve This?

CON laws were originally intended to discourage providers from acquiring expensive and unnecessary capital, and this continues to be a common rationale for the regulation.¹² States also assert that the CON process promotes access to services—especially in underserved areas.¹³ And many claim that the program increases the quality of care.¹⁴

Standard economic theory casts doubt on each of these aspirations. As economists Jon Ford and David Kaserman put it in 1993: “[T]o the extent that CON regulation is effective in reducing net investment in the industry, the economic effect is to shift the supply curve of the affected service back to the left. . . . [T]he effect of such supply shifts is to raise . . . [the] equilibrium price . . . .”¹⁵ Thus, as a supply restriction, CON seems more apt to increase costs (at least in per service terms) than to arrest them. At the same time, standard theory suggests that a leftward shift in supply will reduce quantity supplied, limiting rather than enhancing access to the service in question. Though it is possible that it might increase demand for unregulated substitute services.

The expected effect of CON on quality is more ambiguous. CON advocates sometimes contend that by limiting the number of providers, those that continue to operate will tend to have higher volumes and this, in turn, may make them more proficient in providing those services.¹⁶ Though plausible, it is also possible that the regulation might depress quality by limiting competition. And even if the proficiency-through-volume channel does work, this gain in the quality of care that some receive may come at the expense of others who have less access to care.¹⁷

The rationales for CON do not always comport with the types of services to which the regulation applies. For example, if CON is intended to limit the use of expensive and unnecessary equipment, it is surprising then to see that it is frequently applied to service categories that require little capital such as psychiatric care, substance/drug use care, intermediate care facilities for those with intellectual disabilities, rehabilitation, and home health care.¹⁸ Moreover, if it is intended to promote less-expensive modes of care, then it should not be expected to apply to lower-cost alternatives like hospice, home health, and ambulatory surgery. Nor would we expect states to exempt hospitals from the CON process while retaining it for lower cost providers like ambulatory surgery centers, as West Virginia recently did,¹⁹ or to have higher CON-triggering investment thresholds for hospitals than ambulatory surgery centers, as many states do.²⁰

Finally, if it is supposed to stop providers from overprescribing unnecessary procedures, then it should not be expected to apply to services that are unlikely to be overprescribed, like burn care, neonatal intensive care, or substance/drug use care.

B. How Is Need Determined?

To obtain a CON, providers must prove to a state regulator that the community needs the service in question.²¹ For their part, regulators determine need by constructing state health plans that attempt to project need based on population estimates, utilization of current resources, and past experience.²² In all but six CON states, however, regulators also rely on public comments and formal written objections, including objections from would-be competitors.²³ When a would-be competitor objects to an application, it can trigger an expensive and time-consuming process featuring hearings that are like legal proceedings. In some cases, incumbents drop their objections after the applicant agrees not to encroach on the territory of the incumbent, a type of territorial collusion that would be a per se violation of the Sherman Antitrust Act if it were not facilitated by the state.²⁴

Even when competitors don’t object to an application, regulators may still deny an application if they believe it will “duplicate” an existing service, a practice that guarantees a local monopoly if it is followed literally. The formulas that regulators rely on to determine need open another avenue for competitors to influence the process. These formulas direct regulators to deny an application if current resource utilization is below a certain percentage.²⁵ Incumbents could theoretically increase the odds that a competitor’s application will be denied by keeping their utilization rates below that threshold. Ironically, this may incentivize incumbents to acquire and then not use often-expensive equipment, which seems to contradict the original rationale for CON.

Finally, in some cases such as birthing centers, regulators will refuse to issue a CON if the center cannot convince a hospital to sign a transfer agreement.²⁶ These agreements do not seem to be necessary since hospitals are obliged to accept transfers under the Emergency Medical Treatment and Labor Act.²⁷ But in refusing to sign the agreement, hospitals can guarantee that their would-be competitors will be denied a CON.²⁸ Given the prominent role that incumbent providers play in the CON process, critics contend that CON regulations amount to a “competitors’ veto.”²⁹

Figure 2: Competitors’ Veto States (2025)³⁰

Applicants can spend months or even years preparing applications and they sometimes employ the services of boutique consulting firms to help them navigate the process.³¹ While this Article lacks systematic data on compliance and opportunity costs, some providers report losing hundreds of thousands of dollars in forgone profits while they await approval.³² Approval rates vary from state to state. One analysis found that the approval rate in Virginia was 51%, that of Georgia was 57%, and that of Michigan was 77%.³³

II. Moving Toward a Post-CON World

A. Post-CON Fears

CON laws are obscure. Few people seem to know that they exist. And fewer still understand what they do or how they work. If the regulations are indeed anticompetitive then those who stand to gain from their elimination are patients, payors (including taxpayers and insurance subscribers), and would-be competitors. As a group, those who stand to gain from CON elimination or reform tend to be numerous, diffuse, and politically unorganized. Those who stand to lose, on the other hand—namely, incumbent hospitals—are few in number, concentrated, and politically active. They often employ political action committees, have large and sophisticated government-affairs teams, and work with lobbyists on retainer.³⁴ Public choice economists have long noted that this pattern of concentrated benefits and diffused costs can explain the persistence of inefficient and inequitable policy.³⁵

What do hospital associations say to legislators when CON elimination or reform is being considered? Having testified more than two dozen times on CON laws in state legislatures, the Authors have heard many of these arguments.³⁶ Unsurprisingly, the arguments often center on the stated rationales for CON laws. In a 2022 op-ed, for example, the President and CEO of West Virginia’s Hospital Association reminded legislators that “[t]he CON program was created to ensure West Virginians have access to high-quality, low-cost care,” and asserted that “[t]oday, more than 30 states use CON to ensure quality care and avoid duplication of health care services that would result in higher costs for everyone.”³⁷

Hospital executives and their representatives typically claim that CON reform or repeal will cause health care costs and payments to rise. In 2023, North Carolina’s hospital association warned, for example, that “[r]epealing North Carolina’s CON law will likely raise healthcare costs, not lower them.”³⁸ Incumbent providers benefit from more and higher payments. So the fact that providers typically oppose CON deregulation or elimination is at least some empirical evidence that the regulations raise instead of lower payments.³⁹

Hospitals also often claim that CON reform or repeal will cause hospitals to shutter their doors or to suspend certain services—in response to proposed 2024 reforms, for example, Tennessee’s hospital association warned that “[c]urrent proposed state legislation to drastically change the [CON] law would cause hospital closures, cutbacks in the types of services offered at local hospitals, and ultimately result in a reduction in the availability of care for many Tennesseans.”⁴⁰

The claim that CON elimination will reduce access often rests on an additional claim: “cream-skimming.”⁴¹ Hospital representatives argue that if CON laws are eliminated, new non-hospital providers such as ambulatory surgery centers will appear and take away all the hospitals’ most profitable lines of care such as elective surgery (skimming the cream off the top as it were).⁴² This will leave hospitals with all the unprofitable service categories such as emergency room care. Kentucky’s hospitals assert, for example, that “[l]ike 35 other states and the District of Columbia, Kentucky maintains a CON law that PREVENTS CHERRY-PICKING of certain profitable services by non-hospital health care providers.”⁴³

One interesting thing to note about this claim is that it contradicts the original and most enduring rationale for CON: that it is supposed to reduce payments, saving payors money.⁴⁴ But in the cream-skimming argument, CON advocates concede that CON creates a local monopoly, allowing providers to obtain more and larger payments than they otherwise would (why else would hospitals be unable to make money from certain “cherry” services in the absence of CON?).⁴⁵ In their telling, however, the monopoly is socially beneficial because providers use the monopoly profits to provide emergent and charity care to underserved communities.⁴⁶

Finally, providers have warned that quality will suffer in the absence of CON. In a 2022 opinion piece, for example, the CEO of Hospice Southern West Virginia asserted that “[i]n the case of hospices, having more providers would not necessarily improve access, but it likely would reduce the quality of care.”⁴⁷

B. Answering the Fears

One way to evaluate these fears is to observe what happens in CON and non-CON states. 32% of Americans live in a state with no health care CON requirements and 42% live in a state with no or limited CONs that only apply to a few categories such as ambulance services.⁴⁸ Figure 1 demonstrates that among CON and non-CON categories there are both high- and low-income states, urban and rural states, and coastal and landlocked states.⁴⁹ Using regression analysis, researchers can compare outcomes such as cost, access, and quality in CON and non-CON states while controlling for other, possibly confounding factors such as income and demography. As it turns out, lots of researchers have done this.⁵⁰

In a paper published in 2024, Matthew Mitchell reviewed 128 studies that together contained 458 separate tests assessing the effect of CON on outcomes of concern.⁵¹ Most of these tests focused on the principal objectives of CON laid out in Section I.A above: lower cost, greater access (especially for underserved populations), and enhanced quality.

Figure 3, which is adapted from that study but adds a few additional tests that were published in 2024, summarizes the results.⁵² Among 448 tests with a clear normative implication, 53% associate the regulation with a “bad” outcome such as more spending, less access, or lower quality of care.⁵³ Just 12% of tests associate CON with a desirable outcome.⁵⁴ The evidence is especially lopsided when it comes to spending per service, availability of care, and access for underserved populations. Among 45 tests assessing the relationship between CON and spending per service, 60% associate the regulation with higher spending while just 7% associate it with lower spending.⁵⁵ Among 88 tests assessing the relationship between CON and availability of services, 80% associate the regulation with diminished access while just 7% associate CON with greater access.⁵⁶ And among 24 tests assessing the relationship between CON and underserved populations, 88% associate the regulation with diminished care while none associate it with greater care for these groups.⁵⁷

If the cream-skimming argument was true, less charity care in non-CON states would be expected. But that is not the case.⁵⁸ Moreover, it would be expected that cream-skimming ASCs threaten the economic viability of hospitals. Again, that is not the case.⁵⁹

Figure 3: Summary of Tests with an Obvious Normative Implication⁶⁰

Figure 4: Tests Assessing Outcomes After Repeal of Reform⁶¹

The following is a summary of each of these papers:

* Christopher Conover and Frank Sloan “found no evidence of a surge in acquisition . . . or in costs following removal of CON.”⁶²

* Jamie Robinson et al. (2001) looked at what happened when Pennsylvania eliminated its CON program in late 1996, comparing it to New Jersey, which retained its program.⁶³ They found that in the three years following the elimination of CON, the number of open-heart surgery programs increased 25%.⁶⁴ The total volume of coronary artery bypass graft (“CABG”) surgeries and the mortality rate were both unchanged following repeal.⁶⁵

* Conover and Sloan (2003) found the elimination of CON had approximately zero effect on all expenditures.⁶⁶

* Researchers in two related studies analyzed a 1996 New Jersey reform that relaxed CON requirements for coronary angiography and found that, following the reform, the number of angiography facilities doubled and a large black-white disparity in the procedure disappeared—a trend not observed in neighboring states.⁶⁷

* Vivian Ho, Meei-Hsiang Ku-Goto, and James Jollis (2009) compared states that eliminated CON with those that retained it, focusing on CABG and percutaneous coronary interventions (“PCI”).⁶⁸ Following repeal, they found that the number of hospitals performing CABG and PCI went up, statewide procedure volume for both procedures was unchanged, average hospital volume for both procedures declined, and CABG mortality declined for a time after repeal.⁶⁹

* Jonathan Kolstad examined Pennsylvania’s 1996 repeal, again focusing on CABG.⁷⁰ He found that the number of CABG facilities increased 49% and that surgeries were more likely to be performed by high-quality surgeons following repeal.⁷¹

* David Cutler, Robert Huckman, and Jonathan Kolstad also examined Pennsylvania’s repeal.⁷² Following repeal, they found that travel distances to CABG fell about nine percent, there were no statistically significant effects on total volume of care, there were mixed results on scale with fewer surgeries performed by high-volume hospitals but more performed by high-volume surgeons, there was a shift from standard quality to high quality surgeons, and incumbent hospital margins initially fell following repeal but that these hospitals had regained profitability by 2002 and “were, in fact, the most profitable hospitals by the end of the observation period.”⁷³

* Gerald Granderson observed 144 urban Midwest hospitals from 1996 to 1999 and found that CON repeal resulted in greater hospital efficiency.⁷⁴

* Ho and Ku-Goto found that in those states that removed CON, the cost of CABG declined while the cost of PCI did not.⁷⁵ In Ohio, reimbursements for the procedure fell 2.8% following repeal, while in Pennsylvania, they fell 8.8% following repeal.⁷⁶

* Suhui Li and Avi Dor focused on Pennsylvania’s repeal and documented that, following repeal, there was a substantial increase in the number of hospitals performing cardiac revascularization procedures.⁷⁷ They also found an overall downward trend in CABG and an overall upward trend in PCI; a volume shift from incumbents to entrants, especially among the low-severity patients; and that entry tended to sort high-severity patients into the more invasive CABG procedure and low-severity patients into the less invasive PCI, which they interpret as improving quality.⁷⁸

* James Bailey found that average hospital charges were about 5.5% lower five years after repeal.⁷⁹

* Susan Averett, Sabrina Terrizzi, and Yang Wang focused on hip and knee replacements in Pennsylvania.⁸⁰ They found that, following CON repeal, there was no change in total charges, an increase in the length of stay, no change in hospital acquired infections, and a decrease in mortality.⁸¹

* James Bailey found that states that eliminated CON had 4% lower real per capita health care spending five years after repeal.⁸²

* Vitor Melo, Liam Sigaud, Elijah Neilson, and Marus Bjoerkheim looked at repeal in five states, finding a substantial increase in hospitals in both rural and urban areas following repeal.⁸³ They also found that hospitals tended to be smaller and that the total bed count was lower following repeal (this Article codes this as an outcome that worsened in Figure 4 above).⁸⁴ The latter result is interesting given that several other studies find that CON states typically have fewer beds relative to non-CON states.⁸⁵

* Thomas Stratmann, Markus Bjoerkheim, and Christopher Koopman looked at states that eliminated the CON requirement for ASCs finding a 44–47% increase in statewide ASCs and a 92–112% increase in rural ASCs following repeal.⁸⁶ They found that a continuous increase in ASCs per capita leveled off about ten years after repeal: “Contrary to the ‘cream-skimming’ hypothesis, [we found] no evidence that CON repeal is associated with hospital closures in rural areas. Rather, some regression models show that repeal is associated with fewer medical service reductions.”⁸⁷

In summary, there is little evidence that outcomes worsen following repeal or reform of certificate of need laws. At worst, some outcomes such as expenditures are unchanged. At best, patients can expect to gain greater access to lower cost and higher quality care. To better appreciate these results, we now turn to a specific high-profile reform.

III. Examining Florida’s CON Reforms

In June 2019, Florida Governor Ron DeSantis signed into law a bill that eliminated portions of that state’s CON requirements for health care services.⁸⁸ It was implemented as a phase-in over two periods. The first period began in July 2019 and exempted general hospitals (including acute care facilities, long-term care facilities, and rural hospitals) and providers of tertiary services (including but not limited to open-heart surgery, organ transplantation, and comprehensive rehabilitation) from the CON requirement.⁸⁹ The second period began in July 2021 and exempted Class II hospitals (including children’s and women’s hospitals), Class III hospitals (including specialty medical, rehabilitation, and psychiatric and substance abuse hospitals), and Class IV hospitals (specialty hospitals restricted to offering intensive residential treatment services for children).⁹⁰ Though it was a significant reform in a large state, it was not comprehensive. Nursing homes, hospice care facilities, swing beds, intermediate care facilities for the developmentally disabled, and ambulance services would still be subject to the CON process.⁹¹

This was not the first time that Florida had liberalized its CON requirements for health care service providers. In 2000, the state had eliminated the CON requirements for home health agencies.⁹² In the ten years that followed, the number of home health agencies doubled.⁹³ The expectation was that in the wake of the reforms to hospital CON requirements—particularly beginning in 2019 since that first period of phase-in included the most broad and general types of facilities—the state would experience similarly substantial new investment in hospital facilities.⁹⁴

News reports since 2019 illustrate the overall trend. In the four years prior to the 2019 reform, the estimated dollar value of new hospital construction projects was $5 billion.⁹⁵ In the four years after, it was $6.5 billion.⁹⁶ Furthermore, the announcement of new planned hospitals also increased. State data indicates that from 2020 to 2022 companies announced plans to build at least sixty-five hospitals in Florida.⁹⁷ By contrast, only twenty hospitals were approved between 2016 and 2018.⁹⁸ Some of the new construction included expansions of existing facilities.⁹⁹ Other projects relocated services to a “better” location within a certain geographic area.¹⁰⁰

In many cases, project leaders say that the endeavor would have been impossible under the prior legal regime with its lengthy review process and the possibility of costly legal challenges posed by existing operators opposed to new competition.¹⁰¹ Jose Milton Memorial Hospital in Doral, in the large urban county of Miami-Dade, illustrates the point. Although the state’s Agency for Health Care Administration had approved the application to start construction on the hospital prior to 2019, competitor hospital owners challenged the CON application.¹⁰² According to the CEO of the proposed hospital’s parent company, Jackson Health System: “The way the certificate of need worked is that you can have the competitor sue you . . . . It cost millions of dollars to Jackson over the last several years to fight the ACHA ruling. Those were the court battles going on. Deregulation ceases all of that litigation.”¹⁰³

Figure 5 below shows the total number of ambulatory surgery centers in Florida from 2011 through the third quarter of 2023 (the latest period for which the Authors have ASC data). The pre-reform, phase-in, and post-reform periods are each illustrated with a different color and pattern. Immediately prior to reform, according to Centers for Medicare and Medicaid Services, there were 444 ASCs operating in Florida.¹⁰⁴ Following the first phase of reform—which exempted ASCs with one or two operating rooms from CON—there were 461 ASCs. By the end of 2023, the number had grown to 468.¹⁰⁵

According to the cream-skimming hypothesis, new surgery centers tend to specialize in the profitable services, taking these patients away from hospitals and threatening the financial viability of hospitals. To evaluate this claim, consider Figure 6 below, which shows the total number of hospitals operating in Florida from 2011 through the third quarter of 2024. Prior to CON reform, there were 285 hospitals operating in the state. After the end of the first phase-in, there were 305. After a drop in 2022, the number is back up to 301. Put differently, the number of hospitals in the state grew by 1% in the five years before reform but by 6% in the five years after reform. While new ASCs may compete with and pose a threat to particular hospitals, they seem not to have adversely affected the total number of hospitals in the state.

Figure 5: Total Number of Ambulatory Surgery Centers in Florida¹⁰⁶

Figure 6: Total Number of Hospitals in Florida¹⁰⁷

But this only tells part of the story. Since Florida initiated CON reform, the state has grown by nearly two million residents.¹⁰⁸ To get a better sense of whether the state’s health care services have kept pace with the number of people, consider Figure 7 below. As with the previous figures, it shows the number of services in three periods: pre-reform, phase-in, and post-reform. In this case, however, the number of surgery centers is normalized per 100,000 people. For context, it also shows the average number of ASCs per 100,000 people in states with four or more CONs and in states with three or fewer CONs. Note, first, that in the average state with three or fewer CON requirements, there are significantly more ASCs per 100,000 people as compared to the average state with four or more CONs. Compared with the average highly regulated CON state, there are about 19% more ASCs per 100,000 people in the average limited CON state.

Next, note that Florida seems to be an outlier insofar as it has a high number of ASCs per 100,000—with more ASCs than even the average limited CON states. This almost certainly has to do with the large number of retirees in the state in need of ambulatory care.

Finally, note that Florida’s reforms seem to have had little effect on the number ASCs per 100,000 people. At best, the reforms allowed the number of ASCs to keep pace with the growing population. It is possible, for example, that in the absence of CON reform, the state would have experienced a severe shortage of ASCs. At worst, however, the reforms did little to affect the supply of ASC services.

Figure 7: Ambulatory Surgery Centers Per 100,000 People¹⁰⁹

Next, consider the number of hospitals per 100,000 people. This is shown in Figure 8 below. Here again the typical limited or no-CON state has significantly more hospitals per capita as compared with the typical state with four or more CONs. On average, limited CON states have about 29% more hospitals per 100,000 people as compared with the average state with four or more CON requirements. As with the number of ASCs, however, Florida’s reforms seem to have had little effect on the number of hospitals per person. While Figure 8 offers little support for the cream-skimming argument, it also offers little support for the claim that CON leads to a flood of new services. At best, it seems that the reform has allowed the number of services to keep pace with the state’s burgeoning population.

Figure 8: Hospitals Per 100,000 People¹¹⁰

Another way to access health care capacity is to look at bed counts. Consider data on the total number of hospital beds collected by the Florida Department of Health. In the four years before CON reform, the number of hospital beds grew by roughly 6%; in the four years since CON reform, the number of hospital beds grew by 8.4%.¹¹¹

If we take population growth into account, the increase in hospital beds since CON reform is even more pronounced: The number of hospital beds per 100,000 people declined -0.86% in the four years before reform but grew by 1.6% in the four years after CON reform.¹¹² Thus, while CON reform has not significantly increased the number of hospitals per capita, it has permitted access to more bed capacity.

The distribution of new hospital beds has not been uniform. Most of the new beds were added in urban counties, but that isn’t surprising given that is where most of the population growth in the state is occurring.¹¹³ But access to hospital beds in rural areas has grown after the repeal of CON. Health department data show that of the state’s thirty-two counties considered rural by the definition in Florida statutes (for context, Florida has sixty-seven counties), three of them had percentage point growth in the number of hospital beds substantially higher than the state average: Flagler (a 101% increase) and Columbia (a 24% increase).¹¹⁴

Two small rural counties (Union and Columbia, both of which sit about halfway between Jacksonville and Tallahassee) adjoin each other, presumably putting the new hospital beds in Columbia within a closer driving distance to both county residents.¹¹⁵

What about other types of services? Especially those that cater to vulnerable or underserved populations? Consider Figures 9 through 12 below. Each focuses on a particular type of care: neonatal ICUs, rural dedicated ERs, Medicare or Medicaid-participating service providers, and alcohol and drug use services. In each case, the same pattern holds: Compared with states that have four or more CONs, those with three or fewer CON requirements tend to have significantly more services per 100,000 people. On a per capita basis, these limited and no-CON states have 14% more neonatal ICU units, 91% more rural dedicated ERs, 37% more Medicare or Medicaid-participating service providers, and 12% more drug and alcohol use services.¹¹⁶ In each case, however, Florida’s CON reform seems to have had little effect on the number of services per 100,000 people. Here again, Florida’s reforms may have allowed the number of services to keep pace with the population, but not much else.

Figure 9: Neonatal ICUs Per 100,000 People ¹¹⁷

Figure 10: Rural Dedicated Emergency Rooms Per 100,000 Rural People¹¹⁸

Figure 11: Medicare or Medicaid-Participating Services Per 100,000 People¹¹⁹

Figure 12: Alcohol and Drug Use Services Per 100,000 People¹²⁰

How should we interpret these results? In the wake of Florida’s CON reforms, the state added more hospitals, more ASCs, and more beds. As the state’s population grew however, there was little change in the number of service providers per person (though beds per person did increase). It is possible, of course, that a state’s population is endogenous to its supply of health care services. That is, people—especially those expecting to use health services in the coming years—may be more inclined to move to states that have abundant services.

At the same time, we also see more evidence that states with limited or no CON regulation tend to have significantly more services per person.¹²¹ This is true of hospitals, ASCs, neonatal ICUs, rural dedicated ERs, Medicare or Medicaid-participating providers, and alcohol and drug use providers. In many of those states with limited or no CON regulation, the rules were abandoned years or even decades ago.¹²² Health care services, like all services, are more elastically supplied in the long run than in the short run. So the modest changes in Florida may simply reflect the fact that it takes time for supply to adjust. All of this suggests that both CON advocates and CON reformers expected too much from the reforms. The sky did not fall. Nor was there an avalanche of new services.

Conclusion

Certificate of need laws restrain the supply of new and expanded health care services in about two thirds of states. Those who support this regulation—typically large, incumbent hospitals—often have dire warnings for policy makers contemplating reform. In the absence of CON, they say, hospitals will shutter their doors, costs will skyrocket, and the quality of care will suffer. Sixteen papers and forty-one empirical tests have looked at what happens in states that eliminate or pare back their CON programs. None of these assessments support the dire warnings of CON advocates. There is no evidence that outcomes worsen following repeal or reform of CON laws.

At worst, some outcomes such as expenditures are unchanged. At best, however, patients can expect to gain greater access to care—with more open-heart surgery programs, more angiography services for African Americans, more and closer CABGs, more hospitals performing cardiac revascularization, more rural and urban hospitals, and more rural and statewide ASCs. They can expect to gain this greater access without any significant loss of quality. In fact, they can expect to see lower mortality rates for CABG, more volume for higher quality surgeons, better sorting of high-severity cases into more invasive treatments, and lower mortality following hip and knee replacement. Finally, payors can expect greater hospital efficiency, lower reimbursements for CABG, lower average hospital charges, and lower per capita health expenditures.

A closer look at one particularly high-profile reform offers cautious support for this conclusion. When Florida pared back its CON program following 2019 reforms, the number of hospitals and ambulatory surgery centers grew. The state’s population, however, also expanded markedly during this period. So the number of service providers per person did not change much. At the same time, those states with either no or quite limited CON programs tend to have significantly more services per person than those states with extensive CON programs. Many of those states with no or limited CON regimes reformed decades ago and it may have taken them years to build up their supply of services. For better or worse, no one should expect a CON reforming state to suddenly experience and avalanche of services.

Category: Print Issues

After CON: What Happens When States Repeal or Modify Their Certificate of Need Requirements in Health Care?

Share this article