A new analysis from the Cato Institute reveals that Certificate of Need laws—regulations requiring healthcare providers to get state approval before expanding services—are pushing up medical costs and limiting access to care in 15 states. The briefing paper concludes that these mandates artificially restrict the supply of healthcare facilities and equipment, creating local monopolies that harm patients while protecting established providers from competition.
The report draws on a meta-analysis of 448 tests examining CON impacts, finding that 53% showed these laws lead to negative health outcomes by raising per-service spending and reducing healthcare availability. Rural areas suffer disproportionately: Alabama, which requires CONs for hospitals, has just 3.96 hospitals per 100,000 residents, while Kansas—a state without hospital CON requirements—has 32.12 hospitals per 100,000 people. Communities in rural counties with CON laws also face reduced access to intensive care units, home health services, and diagnostic imaging compared to areas without such restrictions. The report notes that healthcare costs nationwide climbed to $5.7 trillion in 2025, nearly 10% higher than 2024, with the United States spending 18% of GDP on healthcare in 2024—well above peer nations—yet posting the second-highest avoidable death rate in the OECD and among the lowest life expectancies in the developed world.
According to the Cato Institute report, more than 30 states allow existing healthcare providers to submit formal written objections and participate in public hearings when competitors apply for certificates, effectively giving incumbents a "competitor's veto" over new entrants. The report states this arrangement "would be a per se violation of the Sherman Antitrust Act if it were not facilitated by the state." Strikingly, the analysis found that no test demonstrated CONs benefited underserved populations—the very groups these regulations were ostensibly designed to help. Instead, the report identifies areas with limited healthcare access as those most damaged by CON requirements.
The mechanism behind these outcomes is straightforward: by forcing providers to navigate expensive, time-consuming approval processes before building facilities or buying equipment, CON laws give established firms a government-sanctioned tool to block competitors and preserve market share. This constraint on supply drives up costs per service and reduces the total number of healthcare options available, particularly in rural communities where access is already scarce. The report argues that politicians have focused on debating how to pay for rising healthcare expenses without addressing the government policies artificially inflating them. By preventing new independent practices and facilities from entering the market, CON regulations function as policy-designed barriers that prioritize incumbent profits over patient access and affordability.
Change is underway in several states, the report notes. Tennessee passed legislation in April eliminating CON requirements for new acute care hospitals, building on earlier reforms and following states like North Carolina, South Carolina, and Montana that have rolled back their CON mandates. The Cato Institute frames these repeals as progress toward making healthcare more accessible and affordable for those who need it, suggesting that dismantling supply constraints represents a direct path to addressing America's healthcare cost crisis without expanding government spending.