A certificate of need, in the United States, is a legal document required in many states and some federal jurisdictions before proposed acquisitions, expansions, or creations of healthcare facilities are allowed. CONs are issued by a federal or state regulatory agency with authority over an area to affirm that the plan is required to fulfill the needs of a community.
History
The concept of the CON first arose in the field of health care and was passed first in New York in 1964 and then into federal law during the Richard Nixon administration in 1974, with the passage of the National Health Planning and Resources Development Act. Certificates of need are necessary for the construction of medical facilities in 35 states and are issued by state health care agencies: A number of factors spurred states to require CONs in the healthcare industry. Chief among these was the concern that the construction of excess hospital capacity would cause competitors in an oversaturated field to cover the costs of a diluted patient pool by overcharging, or by convincing patients to accept hospitalization unnecessarily. In some instances where state and federal authorities overlap, federal regulations may defer authority from the federal agency to the state agency with concurrent authority as to the issuance of a certificate of need. However, deferment of this authority is not required. For example, the Department of Housing and Urban Development issued the following determination: CONs are sometimes sold in bankruptcy as an asset, and the CON requirement is sometimes used by competitors to block the reopening of existing hospitals.
Criticism
Since new hospitals cannot be constructed without proving a "need", the certificate-of-need system grants monopoly privileges to already existing hospitals. Consequently, Alaska House of Representatives member Bob Lynn has argued that the true motivation behind certificate-of-need legislation is that "large hospitals are... trying to make money by eliminating competition" under the pretext of using monopoly profits to provide better patient care. A 2011 study found that CONs "reduce the number of beds at the typical hospital by 12 percent, on average, and the number of hospitals per 100,000 persons by 48 percent. These reductions ultimately lead urban hospital CEOs in states with CON laws to extract economic rents of $91,000 annually". Michigan's certificate of need laws restricted the availability of CAR T-cellcancer therapy until the legislature intervened in 2019. CONs have been blamed for the shortage of hospital beds during the COVID-19 pandemic in the United States.
