Certificate of Need (CON)
A state regulation requiring hospitals to obtain government approval before building new facilities, adding beds, or purchasing major equipment, intended to prevent excess capacity and control costs.
Certificate of Need (CON) is a term from U.S. hospital cost and quality reporting — the field that produces the CMS Hospital Compare program, the Medicare Inpatient Payment files, and the patient-facing tools built on top of them. The definition below covers what the term means in CMS files, what it does not mean, and how it interacts with the other measures CMS publishes. On the LakeQuality value rubric, Certificate of Need (CON) is one of the inputs (directly or indirectly) to the combined cost-and-quality grade. Understanding how the term is computed at CMS — what counts and what does not — is part of reading hospital pages defensibly.
Each hospital page on LakeQuality surfaces the specific Certificate of Need (CON) value for that facility (when CMS reports one), so the general definition here translates into a concrete data point on the per-hospital pages you actually use.
How It Works
Certificate of Need (CON) laws exist in 35 states and Washington, D.C. as of 2025, with the total number of states steadily declining as legislatures repeal or narrow these programs. CON laws originated with the federal National Health Planning and Resources Development Act of 1974, which required all states to adopt CON programs as a condition of certain federal health funding. The federal mandate was repealed in 1987, and since then states have diverged significantly: some have maintained or expanded CON (New York, Michigan, North Carolina, Virginia have among the most extensive programs), while others have repealed CON entirely (California, Texas, Utah, New Hampshire, Arizona, and others). Under CON, a hospital wanting to build a new wing, add a specific bed count, establish a new service line (cardiac surgery, neonatal intensive care, organ transplantation), purchase major medical equipment above threshold amounts (typically MRI, CT, PET, linear accelerators above $1-$3 million), or open a new ambulatory surgery center must apply to the state health department and demonstrate community need through a formal review process including public hearings. Proponents argue CON prevents duplicative capacity that would raise overall healthcare costs and protects smaller rural hospitals from competitive displacement. Critics, including the FTC and Department of Justice in bipartisan joint statements since the early 2000s, argue that CON restrictions protect incumbent hospitals from competition, limit patient choice, reduce access in underserved areas, and may actually raise prices by limiting supply. Economic research has been mixed but generally finds CON is associated with higher hospital prices and reduced hospital bed supply without clear quality or cost benefits. Several high-profile CON battles in the past decade involved physician-owned specialty hospitals, freestanding emergency departments, and ambulatory surgery centers challenging incumbent hospitals.
Related Terms
- Centers for Medicare & Medicaid Services (CMS), The federal agency within the Department of Health and Human Services that administers Medicare, Medicaid, CHIP, and the ACA marketplace, setting hospital payment rates, quality standards, and the data that HospitalCostData uses.
- Nonprofit Hospital, A hospital organized as a 501(c)(3) tax-exempt entity, making up about 58% of U.S. community hospitals, that reinvests revenue into the community in exchange for federal, state, and local tax exemptions.
- For-Profit Hospital, An investor-owned hospital that operates to generate returns for shareholders, making up about 24% of U.S. community hospitals, paying taxes and distributing profits rather than reinvesting in community benefit.
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About This Definition
This definition is part of the HospitalCostData Hospital Pricing Glossary, 47 terms explaining hospital costs, quality ratings, and healthcare billing. Written for patients, journalists, researchers, and healthcare professionals.