Certificate of Need (CON)
What is a certificate of need (CON)?
A certificate of need is a legal document required in many states or federal jurisdictions prior to capital expenditures such as building new medical facilities or making changes to existing healthcare facilities.
What are the different types of certificates of need?
The types of proposed medical facility or hospital purchases and changes that require a CON can include any of the following scenarios:
- Constructing any new healthcare facility
- Renovating an existing healthcare facility
- Closing an existing healthcare facility
- Changing ownership of a healthcare facility
- Adding a new healthcare service, or removing an existing service
- Acquiring major medical equipment
According to the National Conference of State Legislatures (NCSL), a total of 35 states and Washington D.C. across the U.S. still implement some kind of CON law.
What are the pros and cons of CONs?
In states where CONs are required for some or all of the above changes, healthcare facilities must submit their certificate for approval before proceeding with any purchases or modifications. In their submission, they can make the case for why the community in question would benefit from that new development, purchase, or change. However, the exact criteria used to determine whether an application is approved can differ between states.
The lack of consistent implementation across the U.S. has caused some pushback in states where CON laws are still in place.
Despite CON laws being in place in most states, not everyone agrees with their effectiveness. Supporters of the certificate of need framework argue that it helps to prevent unnecessary spending on healthcare infrastructure and services and that it can help states direct such infrastructure toward underserved regions.
On the other hand, critics argue that the CON framework protects the interests of established facilities – with some believing that by allowing political influence to decide which facilities can be built, the CON system invites corruption, manipulation, and abuse. Additionally, some opponents also argue that CONs have little impact on controlling healthcare costs, improving quality, or ensuring access to healthcare services for patients.
Why are certificates of need (CONs) important in healthcare?
Certificates of need are important because they allow state governments to regulate changes that may impact or potentially increase healthcare spending.
The primary goal of these certificates is to ultimately reduce unnecessary healthcare costs by restricting duplicate healthcare services and assessing whether a new facility or service aligns with the needs of the community.
Healthcare systems or private equity firms that are reviewing markets for possible merger or affiliation opportunities might review hospital CONs in the Definitive Healthcare HospitalView product to find facilities with funding news.
Real estate and construction firms that specialize in hospitals and medical facilities can monitor which healthcare systems in their region are undertaking renovation and expansion projects.