Health andtheLaw State Certificate-of-Need Programs: The Current Status

Certificate-of-need (CON) programs are state regulatory mechanisms for review and approval by health planning agencies of capital expenditures and service capacity expan-sions by hospitals and other health care facilities. In a state with CON, a health care facility is forbidden from undertak-ing a reviewable project unless it obtains planning agency approval based on review of the project against a set of planning criteria and a finding of community need. CON programs have changed significantly over the two decades they have been in operation. First conceived to add regulatory clout to voluntary regional health planning pro-grams whose grand aim was systematic restructuring of health care delivery, they later were a vehicle for implement-ing federal health cost containment policy. Today, state CON programs are increasingly designed to compensate for particular defects in the institutional health services market or to achieve specific quality of care and access-related public policy goals. Certificate of need is a state invention. The first CON law was adopted by New York in 1964. A decade later, 26 states had passed CON laws. Most early laws provided for state agency review of the public need for capital expendi-tures that exceeded $100,0004$150,000 thresholds, additions of beds, and some service expansions by hospitals and nursing homes. Beginning in 1972, many states adopted so-called "Section 1122 " programs, which are a federally funded, state-optional form of certificate of need providing for planning agency review and approval for Medicare and Medicaid reimbursement of capital expenditures proposed by health care facilities. In a state with Section 1122, a health care facility is permitted to undertake a reviewable expen-diture without agency permission, but it cannot obtain Medicare/Medicaid payment for the project's capital costs without such approval. ' By January 1975, 46 states and the District of Columbia had certificate of need, Section 1122, or both