What is a Certificate of Need?

Medical organizations in some states in the United States that want to acquire, replace, or add to their facilities or launch certain medical services must obtain a Certificate of Need from the state health department in accordance with regional regulations. The health department takes into account several factors, including demographics, economic indicators, and geography to approve or disapprove requests by health care providers for a Certificate of Need. The purpose espoused by these regulations, referred to as CON laws, is to control the increase of health care costs and limit unnecessary medical services, although some argue that the effect of those laws is the opposite of the original intent. Legislators who enact these regulations often believe that government restrictions on which medical facilities are built or improved—and the services they can provide—produce a better outcome for controlling health costs than leaving private medical facilities to regulate themselves.

CON laws are enacted in 36 states, and medical organizations not located in those states do not have to request a Certificate of Need. Some health care facilities are also exempt from CON laws, but other types of agencies are described in those laws. These facilities often include long-term care hospitals, nursing homes, and diagnostic centers. CON laws also specify the activities that require providers to apply for a Certificate of Need. Some examples include changes to the bed capacity in the facility, establishment of burn intensive care services, and organ transplant services.

Representatives of a medical facility must often show that a new or expanded service they propose is needed in an area served by the facility. If the need can’t be proved, then it’s often viewed as something that will lead to an unnecessary increase in health care costs. The state health department may also disapprove the request if it will duplicate existing services in the region or if it is proposed by competing medical providers. For example, a medical provider who wants to expand home health care services may have to apply for a Certificate of Need. The state health department sets deadlines for when applicants must submit their requests for consideration.

Some activities do not require any application for a Certificate of Need under some CON laws. These are considered reasonable, ordinary, and necessary expenditures or services that can be expected of medical facilities and providers. A medical facility may not have to apply for a certificate, for example, in order to establish an ambulatory surgical center.