Imagine if your local McDonald’s could prevent a Burger King or Wendy’s from opening in the same neighborhood. Not a recipe for low prices or good service from the Golden Arches, that’s for sure.
Yet for decades, a similar dynamic has played out in our health care system. Certificate of Need (CON) laws require health care providers to obtain government approval before opening new facilities, expanding services, or purchasing major equipment. In most states, existing providers in the market are free to lobby the board or agency responsible for adjudicating CON applications to have the project squashed.
Predictably, decades of research have shown that these laws restrict the availability of medical services, raise costs, and reduce quality. Across the country, momentum is building to roll back these outdated regulations. The latest example comes from the Ocean State.
Last week, Rhode Island Governor Daniel McKee signed the state's new budget into law, including a set of measures that significantly narrow the state's Certificate of Need (CON) program. The changes eliminate CON review requirements for a wide range of health care providers and services, streamline the review process for projects that remain subject to CON review, and restrict which parties can challenge or delay applications from competitors. For those of us who study the costs of health care regulation, this is a meaningful, evidence-based step toward making Rhode Island’s health system work better for patients.
Why This Matters: Research Overwhelmingly Shows That Stringent CON Laws Hurt Patients
CON laws were originally justified on the theory that restricting health care supply would prevent wasteful duplication, lower costs, and promote equitable access to medical services. But when scholars have assessed these claims against hard data, they haven’t held up.
The most consistent finding in the CON literature is that these laws reduce the supply of medical care without producing commensurate access benefits. A study I co-authored found that states that eliminated hospital CON laws saw increases in the number of hospital facilities of about 4% over the following two decades, consistent with stronger competition and broader patient choices. The real-world implications are stark. When a team of researchers, including Knee Center director Dr. Alicia Plemmons, examined the impact of CON laws during the COVID-19 pandemic, they found that states with high health care use that reformed their CON laws during the pandemic saw a reduction in mortality from COVID-19 and many other causes, relative to CON states that did not loosen their regulations during the crisis. Other work by a team of Knee Center scholars shows that CON restrictions on substance use disorder treatment facilities are associated with higher emergency department utilization and worse health outcomes for vulnerable populations.
Proponents of CON laws sometimes argue that concentrating high-complexity procedures in fewer, higher-volume facilities improves outcomes. The evidence does not bear this out. Research comparing hospitals in CON and non-CON states finds worse mortality in CON states. Hospitals in CON states receive lower quality ratings across many different measures, including patient surveys, surgical complication rates, and re-admission rates. Rather than consolidating quality, CON laws appear to protect incumbent providers from the competitive pressure that drives quality improvement.
Finally, a central promise of CON regulation was cost control. That promise has never been fulfilled. A large body of research concludes that CON laws have not reliably reduced health care spending, and may actually impose higher costs on patients and taxpayers. There are a few possible explanations. First, by eroding competition, CON laws empower incumbents to raise prices. Second, by limiting the supply of health care services, CON laws may make it harder for patients to access timely care in low-cost settings, causing higher downstream costs due to worsening symptoms and emergency room visits.
A Brief History of CON in Rhode Island
Rhode Island has a long history with CON regulation, having been the second state in the nation (after New York) to enact a CON statute in 1968. These laws were initially adopted as part of a wave of similar state-level legislation in the 1960s and 1970s, and were later reinforced by federal requirements under the National Health Planning and Resources Development Act of 1974, which threatened to withhold federal funding from states that did not implement CON programs. When Congress repealed those federal requirements in 1987, many states removed or scaled back their CON regulations — but Rhode Island kept its program intact and, in some respects, expanded it. As of 2020, Rhode Island’s CON program covered nearly two dozen specific types of care or equipment, including hospital beds, heart surgery, NICUs, radiation therapy, and substance/drug abuse treatment.
Moreover, Rhode Island’s CON regulations were complex and difficult for applicants to navigate without costly legal support. As described in a 2025 overview of the program, the process required a formal letter of intent, a detailed application addressing community need and financial feasibility, and a review schedule with only two cycles per year. Applications could be challenged by existing providers — a feature that many observers, including the Federal Trade Commission, have long identified as giving incumbents a powerful tool to block new competitors.
Letting Markets Work Better: Rhode Island’s CON Reform
The law recently adopted in Rhode Island makes several significant changes to the state’s CON program, including:
- CON review is no longer required for home nursing care providers, home care providers, multi-practice physician ambulatory surgery centers, or multi-practice podiatry ambulatory surgery centers.
- CON review is no longer required for the acquisition of CT scanners, MRI machines, PET scanners, and PET/CT scanners.
- The capital expenditure threshold for CON review is raised to $50 million, meaning that many more projects will be exempt from the CON process. (Formerly, the thresholds were about $3 million for health care equipment and $8 million for construction costs.)
- The timetable for CON review is shortened, which will reduce delays and reduce legal costs for applicants.
- The ability of incumbent providers to weaponize the CON process against new entrants is restricted. The definition of "Affected Person" who may comment on a CON application has been revised to exclude health care facilities located within the state that provide institutional health services — precisely the parties who historically had the greatest incentive to oppose new competition.
Rhode Island joins a growing number of states that have moved to reform or repeal their CON programs in recent years. The evidence strongly suggests that states that take these steps will see broader provider entry, more competitive markets, and improved access to care.
Liam Sigaud is a Research Associate in the Knee Regulatory Research Center at West Virginia University.