Certificate-of-need laws—originally designed to prevent the duplication of healthcare services in a specific geographic region—may be on the chopping block for many states as a condition of the federal Rural Health Transformation program.
Every state submitted applications seeking a share of the $50 billion program, which was launched in 2025. But CMS and President Donald Trump’s administration have tied some of that funding to certain policies at the state level, including the elimination of CON, according to a summary of the RHT published by the American Medical Association in September.
CON laws have been up for debate in numerous states over the last several months, as many physicians, ASC leaders and other stakeholders—including the AMA—criticize them for stifling competition, restricting healthcare access and driving up the cost of care.
Proponents of the laws argue that they ensure that underserved communities are receiving accessible, appropriate care, according to the National Conference of State Legislature. For example, some states require health systems and facilities to have financial assistance policies or discounted care programs for low-income patients as a condition for CON approval.
State lawmakers on either side of the debate are now under pressure to repeal these laws as they vie for RHT funding.
Tennessee, for example, has had plans to repeal the 40-year-old law by Dec. 1, 2027, since 2024. When Gov. Bill Lee applied for the first round of the RHT, he pledged that the legislature would eliminate CON by Jan. 1, which would require lawmakers to speed up their repeal efforts this legislative session.
This appears unlikely, CBS affiliate WJHL 11 reported March 9., as legislators have thus far introduced other amendments that push some CON reform past next year. A recent amendment would delay eliminating CON for acute care hospitals until 2030.
In a recent committee hearing, Michael Hendrix, a policy director for Mr. Lee told legislators that some of the program’s $207 million already dedicated to Tennessee could get clawed back if CON and other policy changes don’t occur.
In a separate but related case, the Federal Trade Commission cautioned that House Bill 2278 and Senate Bill 2414—which would allow Johnson City, Tenn.-based Ballad Health’s Certificate of Public Advantage to expire—could result in what the agency called the “worst possible outcome for patients.”
In the April 1 letter addressed to Rep. David Hawk, the agency argues that repealing a COPA in the absence of competing hospital systems hands a monopolist unconstrained market power, free from both state regulation and antitrust enforcement.
“When COPAs expire the risk of price and quality harms increases significantly, including harm to quality of care and availability of healthcare services,” the letter states.
The letter urged the Tennessee General Assembly to repeal CON laws “as soon as possible” — and no later than the date any COPA expires — to avoid undermining the legislature’s own stated goal of increasing competition.
The case may serve as a warning to other CON states seeking RHT funds. Daniel Decker, MD, a urologist and co-founder of Vitality Plus Urology Clinic in Mountain Home, Ark., told Becker’s that the RHT funds could be pivotal for ASCs, outpatient facilities and smaller organizations who are positioned to utilize the funds in a more nimble and targeted manner in the communities they are closely tied to.
“It could really transform a lot of things that need to be fixed,” he said. “I’m at that point in my career — 15 years in — and we’ve got a ton of patients. We’re overwhelmed and we’ve got to be more efficient and innovative.”
Despite having less access to resources than a hospital or health system, investments in rural ASCs — like that of the RHT — may have a bigger impact as money is more directly placed into the hands of physicians.
“There really is an opportunity for funding that can make a difference,” he said. He noted that administrative growth has long outpaced the growth of the physician workforce, which has resulted in valuable resources and funding often being placed in the power of nonpatient-facing roles.
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