Do Certificate of Need Laws Work? The Data Says No

Certificate of Need (CON) laws were enacted with the stated objective of controlling healthcare costs and preventing unnecessary duplication of services.

Nearly 50 years later, the empirical record does not demonstrate that they achieve those goals. Today, 35 states and the District of Columbia maintain some form of CON program. However, comparative research between CON and non-CON states reveals consistent patterns.

Reduced Facility supply and constrained market entry

Analysis from the Mercatus Center at George Mason University finds that states with CON Laws have:

--30% fewer hospitals per capita
--14% fewer ambulatory surgery centers (ASCs)
--13% fewer MRI units

By design, CON frameworks restrict entry and expansion. The Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) have repeatedly warned that CON laws create barriers to entry and can undermine competitive market dynamics. Reduced supply may limit duplication, but it also reduces competitive pressure.

No consistent evidence of lower costs

If CON laws were an effective cost-control mechanism, spending in CON states would be measurably lower. The evidence does not support that conclusion.
Mercatus research finds that certain cardiac procedures cost 5-11% more in CON states. Studies published in Health Affairs associate CON regulations with higher spending per admission, without consistent improvements in outcomes.

The broader hospital consolidation literature, including work published through the National Bureau of Economic Research (NBER), shows that reduced competition in concentrated markets is associated with 10-20% price increases. Entry barriers and consolidation are closely linked.

Governance and structural concerns

In many states, CON boards include members affiliated, directly or indirectly, with incumbent health systems. When existing providers influence whether potential competitors are permitted to enter the market, structural conflicts are difficult to ignore. Even the appearance of regulatory capture warrants scrutiny.

Policy durability

Since the federal CON mandate was repealed in 1986, 15 states have fully eliminated their CON programs. None have reinstated a comprehensive regime.

That trajectory is notable. If CON laws consistently delivered lower costs and improves access, reversals would be expected. They have not occurred.

At a minimum, Congress and federal agencies should reexamine whether federal dollars should continue to flow without regard to state policies that restrict competition. Healthcare affordability will not improve by limiting entry. It improves when markets are competitive, transparent, and accountable.

Sources: Mercatus Center (George Mason University); FTC & DOJ joint statements on CON; Health Affairs; National Bureau of Economic Research (NBER).