6 States Are Rethinking the Law That Makes Hospitals Ask Permission to Compete
In Weaverville, North Carolina, a hospital the community needed finally broke ground this year. It had already won approval from the state. Then it spent 3 years in a court fight before anyone could pour concrete.
That approval has a name. It's called a certificate of need. In more than 30 states plus Washington, DC, a hospital or clinic has to prove to state regulators that a community needs a new service before it can build one. Some of these laws reach all the way down to a single imaging machine.
Think about what that means in practice. The people best positioned to argue that a town doesn't need a new hospital are the people who already own the existing one.
Now Washington is putting money on the table. The Trump administration told states it would score their applications for the $50 billion Rural Health Transformation Program higher if they loosen or end certificate-of-need rules. As KFF Health News detailed in a recent report, 6 states have signaled they will revisit them. Tennessee passed a bipartisan bill in April to unwind most of its remaining rules over 4 years. Alaska, Connecticut, Delaware, Iowa, and Mississippi say they will consider scaling theirs back. South Carolina already voted in 2023, and in January it stops requiring a state permit for new hospital construction.
This isn't a red state idea or a blue state one. A South Carolina state senator put it well back in 2021: "If there's an issue where you can have President Obama and President Trump in agreement on something, that tells you the idea probably has some merit."
The laws were originally sold as a way to prevent redundant building and hold down spending. Critics point to what happened instead: higher prices, multi-year court delays, and rural patients driving hours for equipment the city hospital kept to itself.
Now the honest part, because the counterargument deserves a fair hearing.
A rural hospital CEO in Tennessee warned that without the law, big chains will cherry-pick growing suburbs with privately insured patients and leave struggling rural hospitals behind. A month after his letter, HCA, the largest hospital company in the country, applied to build a hospital 20 minutes from his. Another independent system in the region, Williamson Health, cited the changing rules when it agreed this year to sell to Ascension St. Thomas in a $900 million deal. And a state health policy researcher noted to KFF that once certificate-of-need oversight disappears, states often lose visibility into ownership changes, including when private equity buys up local facilities.
Repealing a permit law doesn't magically fill a county with independent community hospitals. Sometimes the biggest bulldozer in the state shows up first.
Still, after years on the physician side of the table, one lesson holds up everywhere: laws that require an incumbent's permission to open a door rarely protect the patient. They protect whoever got the license first.
Direct primary care practices mostly live outside this regulatory trench warfare. When a family doctor wants to open a membership clinic, she signs a lease, buys an exam table, and posts her monthly fee. Nobody holds a three-year administrative hearing to decide whether her town is allowed to have another stethoscope. If she takes good care of people, her panel fills. If she doesn't, patients walk. That is the only certificate of need that ever worked.
The answer to hospital consolidation isn't a state permit board. It's lower barriers for independent medicine: more small clinics, more posted cash prices for labs and imaging, and more doctors who answer to the families in their waiting room instead of a regional health system.
Every town needs a hospital when a tractor rolls or a heart artery closes at 2 a.m. How many clinics and beds a community supports, though, should be decided by the people who live there, not by the competitor down the highway.
6 states are reconsidering the permit requirement. Watch what gets built next, and who gets to build it.
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