The purported aim of state administrative law is balance between a healthy market and public good. However, when regulations continue to exist after their economic justifications have withered away, they invariably create the very market failure they were intended to prevent. No part of this friction is more evident than in how states have regulated their Certificate of Need systems. Today, 35 states prohibit healthcare providers from establishing new facilities, adding hospital beds, or acquiring advanced imaging equipment without approval from a state board (National Conference of State Legislatures, 2024). In the last century, regulators anticipated that restricting the supply of health care would control rising costs. Today, state CON regulations have become little more than a state-backed protectionist monopoly that limits care and worsens disparities across rural America.

The glaring deficiency of the CON framework is its perversion of normal market entry. In order to get a permit, applicants have to traverse a complex, quasi-judicial process solely to establish that the community "needs" the new service. Currently, existing hospital systems can use CON hearings to legally block the emergence of any new competitors (U.S. Department of Justice & Federal Trade Commission, 2016). The reality is that well-capitalized hospital conglomerates and their attorneys have every incentive to tie up the smaller independent applicant in the courts indefinitely. This process basically allows dominant health systems to capture state boards and continue their business of excluding smaller providers on top of inflating their own prices over the needs of the smaller, less profitable rural market.

When one constricts the supply of care artificially, health disparities tend to directly correlate with geography. Large cities will have abundant backup care services to accommodate bureaucratic gridlock, but rural towns suffer from critical care deficits (Rural Health Research Gateway, 2021). This has devastating consequences when local surgical clinics are denied the ability to open or to acquire MRI machines in more isolated communities: local patients are forced to endure extended waiting periods or drive for hours into urban centers for basic procedures (Mitchell, 2021). Geography thereby limits access to care, with these barriers magnified by artificial supply constraints.

The bureaucratic gridlock of state medical systems does little to prepare the healthcare apparatus of any given state for rapid shifts in population or specific health crises that call for responsive and agile systems. It can take months for states to approve the addition of a single acute-care bed to a small ward, with thousands of dollars in administrative fees required along the way (Virginia Department of Health, 2026). Local clinics simply cannot add capacity to deal with surges without threatening their operating ability. Opponents of regulation are consistently told that dropping the rules will encourage wealthy providers to "cream-skim" the market's most lucrative, insured patients, and leave charity-care hospitals to fail. However, empirical evidence suggests that removing state-mandated restrictions on care have little to no negative impact on charity care but significantly increase the availability of total health services (Mitchell, 2021).

Finally, admitting the failure of a well-intentioned regulatory policy requires acknowledging regressive impacts. If the ultimate goal of health care policy is people's health, state administrative law should ultimately foster open access and reject corporate monopolies. Defending antique certificate of need laws as efficient is no longer tenable. To achieve equity in health care, state-sanctioned monopolies must be dismantled and administrative regulations rewritten from the ground up.

Acknowledgement

The Institute for Youth in Policy wishes to acknowledge Donna Kim for editing this op-ed.

References

Mitchell, M. D. (2021, May 21). Certificate-of-Need Laws: How They Affect Healthcare Access, Quality, and Cost. Mercatus Center at George Mason University. https://www.mercatus.org/economic-insights/features/certificate-need-laws-how-they-affect-healthcare-access-quality-and-cost

National Conference of State Legislatures. (2024). Certificate of Need State Laws and Healthcare Market Regulation. NCSL.org. Retrieved from https://www.ncsl.org/health/certificate-of-need-state-laws

Rural Health Research Gateway. (2021, April). Changes in Provision of Selected Services by Rural and Urban Hospitals Between 2009 and 2017 (Policy Brief No. 1427). North Carolina Rural Health Research and Policy Analysis Center. https://www.ruralhealthresearch.org/publications/1427

U.S. Department of Justice & Federal Trade Commission. (2016). Joint Statement of the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice on Certificate-of-Need Laws and South Carolina House Bill 3250. Antitrust Division. https://www.ftc.gov/legal-library/browse/advocacy-filings/joint-statement-federal-trade-commission-antitrust-division-us-department-justice-certificate-need

Virginia Department of Health. (2026). Office of Licensure and Certification: Division of Certificate of Public Need Batching Schedule / Project Submission Deadlines  [PDF]. Adobe Acrobat Cloud. https://acrobat.adobe.com/id/urn:aaid:sc:us:c8cab680-3c3e-444e-a877-ccda204ea5a8