What is a 'Certificate Of Need'

A Certificate of Need (CON) is an endorsement that numerous states require before approving the construction of a new health-care facility. The central idea of CON legislation is the assertion that overbuilding and redundancy in health-care facilities leads to higher health-care costs.

BREAKING DOWN 'Certificate Of Need'

Certificate of Need (CON) programs are aimed at ensuring that a new hospital or nursing home is necessary, and they require state authorities to determine whether the local demand is sufficient to allow for the new construction.

In 1974, the federal Health Planning Resources Development Act was passed, and subsequently many CON laws went into effect. Most states today have some type of CON law, program or agency. The federal Act required all 50 states to develop agencies and other structures that require proposal and approval before the onset of any major projects requiring significant expense and infrastructure. But individual states were passing versions of these laws much earlier: in 1964, New York became the first state to develop a CON statute. After the 1974 federal Act was passed, states began complying, until every state except Louisiana enacted CON laws. The federal mandate was repealed in 1987 and many states since have discontinued CON programs. As of 2016, 34 states maintain some form of CON program, as do Puerto Rico, the U.S. Virgin Islands and the District of Columbia.

Pros and Cons of Certificate of Need

The National Conference of State Legislatures offers a handy reference to typical arguments for and against Certificate of Need (CON) Laws, some of which are summarized below.

Arguments for CON laws:

  • Health care is not a “typical” economic product.
  • Most health services (like lab tests) are ordered by physicians, not patients. Patients do not shop around as they do for other goods and services.
  • CON programs reign in spending and can re-focus on underserved areas that new medical centers may not serve.
  • CON processes aren’t categorically blocking change but merely calling for scrutiny and assessment, which includes public input.

Arguments against CON laws:

  • CON programs vary state to state, with inconsistent metrics and management.
  • Con programs allow for political influence in deciding whether facilities will be built, which can invite manipulation and abuse.
  • Identifying the “best interests” of a community isn’t always clear; decisions ostensibly made for the greater good could have unintended consequences in the long-term, particularly in an unsteady economy or, for example, in a rapidly gentrifying neighborhood.
  1. Service Certificates

    Service certificates are bond-like certificates that promised ...
  2. Small Saver Certificate - SSC

    A Small Saver Certificate is a deposit savings account that has ...
  3. Silver Certificate

    A silver certificate was a form of legal tender issued by the ...
  4. Stock Certificate

    A stock certificate is a physical piece of paper representing ...
  5. Certificate of Participation - ...

    A certificate of participation (COP) is a type of financing where ...
  6. Periodic Payment Plan Certificate

    A periodic payment plan certificate is a certificate representing ...
Related Articles
  1. Investing

    Flipping Properties

    Flipping is a real estate investment strategy that can produce a large profit over a relatively short time period. Find out how this technique works and what pros and cons investors should consider ...
  2. Insights

    Fiscal Policy vs. Monetary Policy: Pros & Cons

    When it comes to influencing macroeconomic outcomes, governments have typically relied on one of two courses of action: monetary policy or fiscal policy.
  3. Investing

    Capital Intensive Companies: What Are The Pros & Cons for Investors?

    Learn about the pros and cons of investing in capital-intensive industries. Find out how barriers to entry and mature industries impact investment outlook.
  4. Investing

    The Pros And Cons Of A Pegged Exchange Rate

    A pegged exchange rate occurs when one country fixes its currency’s value to the value of another country’s currency. But it has both pros and cons.
  5. Insights

    What Is a Silver Certificate Dollar Bill Worth Today?

    Although a silver-certificate dollar bill no longer can be exchanged for silver, the date, grade and unique features make certain certificates very valuable.
  6. Taxes

    Pros and Cons of an Internet Sales Tax

    Learn about the pros and cons of a nationwide Internet sales tax and the different bills that have been proposed to establish laws regarding Internet sales.
  7. Personal Finance

    The Pros and Cons of Leasing a Car

    Consider these pros and cons before deciding whether or not to lease a car.
  8. Personal Finance

    Should You Take a Loan From Your 401(k)?

    There are pros and mostly cons to taking a loan from your 401(k) plan.
  9. Investing

    The Pros and Cons of Buying a House on a Main Road

    Although you might assume that most people would want to avoid buying a house on a main road, there are actually pros to consider along with the cons.
  10. Retirement

    Retiring in Puerto Rico: The Pros and Cons

    Puerto Rico is a popular retirement spot for those seeking new experiences and a better climate while staying close to home. Here are some pros and cons.
  1. If I already hold a professional certification am I eligible for any exemptions from ...

    No. To obtain a CFA designation, you must complete all levels of the CFA program regardless of whether you hold a professional ... Read Answer >>
Trading Center