xRead - Full Articles (March 2025)

1251937 INQ XXX10.1177/00469580241251937INQUIRY Mitchell research-article 2024

Policy Analysis

INQUIRY: The Journal of Health Care Organization, Provision, and Financing Volume 61: 1–11

Certificate of Need Laws in Health Care: Past, Present, and Future

© The Author(s) 2024 Article reuse guidelines:

https://doi.org/10.1177/00469580241251937 sagepub.com/journals-permissions DOI: 10.1177/00469580241251937 journals.sagepub.com/home/inq

Matthew D. Mitchell, PhD 1

Abstract Certificate of need (CON) laws limit the supply of health care services in about two-thirds of U.S. states. The regulations require those who wish to offer new services or expand existing services to first prove to a regulator that the care is needed. While advocates for the regulation have offered several rationales for its continuance, the balance of evidence suggests that the rules protect incumbent providers from competition at the expense of patients, payors, and would-be competitors. In this article, I review the history of CON laws in health care, summarize the large literature evaluating them, and briefly sketch options for reform. JEL Classification: I11, I18, H75

Keywords certificate of need, health care, regulation

What do we already know about this topic? Certificate of need laws in health care vary significantly across time and across state in the U.S. How does your research contribute to this field? This article reviews the past, present, and future of CON laws, summarizes the empirical evidence evaluating these regu lations, and offers a menu of options for reform. What are your research’s implications toward theory, practice, or policy? Neither theory nor evidence suggest that CON laws work as advertised. But for policymakers who wish to increase access to higher quality, lower cost care, there are plenty of options for reform.

Past The Origin of Certificate of Need Laws in Health Care Certificate of need laws were introduced in transportation markets as early as the Great Depression. 1 It wasn’t until 1964, however, that New York State enacted the first CON law in health care. By the end of the decade, 25 additional states had similar regulations. 2(p. 1225) These early programs required providers to obtain regulatory approval for capital expenditures exceeding $100 000 to $150 000. 2(p. 1225) In late 1974 Congress passed the National Health Planning and Resources Development Act (hereafter NHPRDA). It encouraged states to adopt CON regulations by threatening to withhold federal funds from any state without such a pro gram. 3 In the run-on-sentences that characterize federal leg islation, the NHPRDA lamented the “massive infusion of Federal funds into the existing health care system [that] has contributed to inflationary increases in the cost of health care

1 Knee Regulatory Research Center at West Virginia University, Morgantown, WV, USA Received 27 December 2023; revised 21 March 2024; revised manuscript accepted 15 April 2024 Corresponding Author: Matthew D. Mitchell, Knee Regulatory Research Center at West Virginia University, 13 High Needle Overlook #249, Morgantown, WV 87710, USA. Email: matthew.mitchell1@mail.wvu.edu and failed to produce an adequate supply or distribution of health resources, and consequently has not made possible equal access for everyone to such resources.” 3 The authors of the NHPRDA thought that CON programs would stop pro viders from introducing expensive and potentially unneces sary services, saving taxpayers and other payors from the burden of paying for such care. They also thought that the regulation would encourage “the use of appropriate alterna tive levels of health care, and [provide] for the substitution of

Creative Commons Non Commercial CC BY-NC: This article is distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 License (https://creativecommons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage).