Welcome to CON Quarterly

Welcome to the inaugural edition of the Certificate of Need Newsletter. Not many people know about CON laws. And even fewer care about them. So, thanks for caring!

Since you are reading this, you probably know something about CON laws. If not, here is the TL/DR version: In markets where the government requires a CON, those who wish to offer a new service or expand an existing service must first prove to a regulator that the service is needed. As the name suggests, the regulator’s primary task is to determine if the service is needed, not to determine whether the provider is qualified or if his or her safety record is adequate.

CON laws can be found in a handful of industries, including rail transport, taxi service, and moving services. But their most prominent application in the U.S. is in healthcare. In about two-thirds of states, healthcare providers may not open or expand their services without first proving that the community needs the new or expanded service. As we will explore in this newsletter, CON laws tend to reduce patients’ access to low cost, high-quality healthcare.

What can you expect from this newsletter?

First, we won’t waste your time. We plan to write about once a quarter, and we promise to make it relatively brief and highly relevant.

Second, we plan to cover CON from all angles. CON laws have been well-studied, and we will make sure you are up-to-speed on the latest research. There are also fascinating stories about patients and providers affected by CON laws, and we will delve into those as well. Finally, we will keep you up-to-date on the latest legislative and legal developments in this space.

So here goes: In today’s newsletter, we will cover the latest research and give a broad review of bills that passed in 2024 and bills we are following in 2025.

A spate of new research gives us a better sense of how CON works

Those who benefit from CON laws—namely incumbent hospitals—have a long list of arguments for why CON should be retained. Without CON, they say hospitals will shutter, patients will lose access to care, quality will suffer, and costs will soar. Most of these arguments seem to contradict standard economic theory which suggests that a supply restriction, well, restricts supply. According to the standard model, if supply increases, we should expect patients to gain greater access to higher-quality, lower-cost care. But we needn’t rely on theory alone.

Researchers have spent decades studying what happens to access, quality, and cost in states with and without these rules. The Southern Economic Journal was one of the first academic journals to publish papers on CON laws (here, here, and here). And in late 2024, they published a spate of new articles assessing the effects of CON. Here is a quick run-down:

1. CON and the labor market

​​​​Economists Kihwan Bae and James Bailey wanted to know how CON laws affect healthcare workers. Using data from 1979 through 2019, they find that CON regulations had no significant effect on either the employment or wages of healthcare workers.

2. CON and rural healthcare access

Economists Vitor Melo, Liam Sigaud, Elijah Neilson, and Markus Bjoerkheim take a close look at repeal of CON laws in five U.S. states to estimate the causal effects of CON laws on rural and urban healthcare access. They find that repeal of CON laws causes a significant increase in hospitals in both rural and urban areas.

3. CON and access to substance use disorder treatment facilities

Economists Shishir Shakya and Christine Bretschneider-Fries wanted to know how substance use CON laws influence access to substance use disorder treatment facilities. Based on the locations of these facilities and the population centers of counties, they developed an index that measures access to substance use disorder treatment facilities. Their index accounts for both driving distance and duration to reach one of these facilities. They found that counties in states with CON laws that border counties without CON laws have nearly 10% less access to substance use disorder treatment facilities.

4. CON repeal and access to ambulatory surgical centers

Thomas Stratmann, Markus Bjoerkheim, and Christopher Koopman wanted to estimate the causal effects of ambulatory surgery center CON repeal on statewide and rural access to care. Statewide, they found that repeal increased the number of ASCs per capita by 44%-47%. In rural areas, repeal increased the number of ASCs per capita by 92%-112%. After states repeal ASC CON requirements, they tend to experience a continuous increase in ASCs per capita for about 10 years. They write that “Contrary to the ‘cream-skimming’ hypothesis, we find 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.”

5. CON and substance use disorder care for vulnerable populations

Economists Alicia Plemmons, Darwyyn Deyo, and Sarah Drain looked at the effect of CON laws on the quality of care for Medicaid patients with substance use disorders. They find “significant evidence that state CON laws for SUD treatment facilities are associated with higher rates of hospital bed utilization, increases in the number of infants born with Neonatal Abstinence Syndrome, and higher rates of emergency department visits.”

6. A comprehensive review of the literature

After reading and writing about CON laws for over a decade, Matt wanted to make sure he was providing the most comprehensive and accurate assessment of the literature. So he read every CON law paper he could find. He found that there have been 128 academic assessments of CON laws and together these papers contain over 450 tests. In this paper, he reviewed the literature, organizing the results around the most common rationales for CON laws. He reports that “The accumulated evidence is overwhelming that CON laws do not achieve their purpose. Instead, the balance of evidence suggests that these regulations increase spending, reduce access to care, undermine quality, and fail to ensure care for underserved populations.”

States are reforming and repealing CON laws

Around the country, states are reforming and repealing CON laws. These changes range from broad (South Carolina repealing all healthcare CON laws except nursing homes in 2023) to narrow (Michigan repealing CON for birth centers in 2024). While we’d like to see more full-repeal bills, these reforms show that change is possible. We will use this section to provide updates or occasional deep dives into specific legislative efforts.

Here’s the latest on the legislative front.

State CON law reforms in 2024:

1. Oklahoma repealed CON for all services except nursing homes.

2. Georgia streamlined the CON application and appeal process. They also repealed CON for several facilities and services, including: ​​​​​​

• Birth centers
• General acute-care hospitals in rural counties
• Inpatient psychiatric programs
• Inpatient substance use rehab programs
• Perinatal services at rural hospitals
• Acquisition/replacement/repair of imaging equipment by existing facility/practice groups
• Expanded services at hospitals so long as they do not change the number of beds
• Expansions, remodels, or relocations between existing facilities

3. Tennessee also streamlined the CON application and appeal process. They also repealed CON for several facilities and services, including:

• Acute care hospitals in counties without one
• Burn unit services
• Intermediate care facilities
• Linear accelerator services
• MRI services and PET services, except in the largest six counties
• Neonatal intensive-care services
• Open-heart surgery services
• Satellite emergency departments in non-economically distressed counties

4. Washington extended an exemption to CON for psychiatric care beds and facilities through 2028.

Here is a (non-exhaustive) list of CON reform bills we are watching:

1. Arizona HB 2197: Repeals Arizona’s only CON, ambulance service.
2. Connecticut SB 266: Repeals CON for many outpatient and inpatient services and streamlines CON application process.
3. Kentucky SB 17: Repeals CON for freestanding birth centers.
4. Maryland HB 0735: Repeals CON for psychiatric care facilities and services.
5. Mississippi HB 922: Repeals CON for a long list of things, including psychiatric residential treatment, substance use disorder services and facilities, intermediate-care facilities, hospital-based dialysis, MRI, and diagnostic angiogram. It also raises the capital threshold that triggers a CON requirement to $3 million for equipment and $20 million for services/facilities.
6. Nebraska LB 437: Repeals healthcare CON in Nebraska.
7. Oregon HB 2022: Repeals CON for facilities providing rehabilitation services for brain and spinal cord injuries.
8. Oregon HB 2021: Prohibits existing facilities from challenging CON approval in court.
9. Rhode Island HB 5076: Raises expenditure threshold that triggers a CON to $50 million and streamlines CON application process. These reforms are included in the Governor’s budget bill.
10. Rhode Island HB 5355: Full CON repeal.
11. Wyoming repealed its lone remaining CON for nursing homes.

That’s it. Please forward this newsletter to anyone you think might benefit from it. And drop us a line and let us know what you’d like to see in the next edition.

Best,
Jaimie and Sriparna​​

Jaimie Cavanaugh is legal policy counsel at Pacific Legal Foundation, where she works with legislators across the country to end CON laws. She is a CON policy expert and regularly testifies at state capitols in support of bills to repeal or reform CON laws. She also helps behind the scenes by drafting bill language, gathering data for legislators, and building coalitions on the ground. Previously, she represented Nepali immigrants who challenged Kentucky’s CON laws in court after they were prevented from opening a needed home health agency.

Sriparna Ghosh is an Associate Professor of Economics at the University of Cincinnati (UC), Blue Ash and also a Research Affiliate at the Knee Center for Studies of Occupational Licensing Regulation (CSOR). She received her PhD in Economics from West Virginia University in 2017. As a trained applied microeconomist, she focuses on health, labor and entrepreneurship economics in her research. More specifically, she focuses on understanding access and barriers within labor markets and health outcomes of underserved communities. In her current research project(s), she is investigating mechanism(s) of occupational licensing and Certificate of Need (CON) policies in understanding the relationship between public policy and health outcomes.