CMS Scores Rural Health Funding Applications Higher for States That Loosen Hospital Certificate-of-Need Laws

Since the Rural Health Transformation Program became law last year as part of President Trump's One Big Beautiful Bill Act, one of its conditions has drawn the most attention at the state level: what a state does with its certificate of need laws.

The program makes $50 billion available to states over five years. A chunk of that money is partly contingent on policy commitments. In its notice to applicants, the Centers for Medicare & Medicaid Services called certificate of need, or CON, laws "an additional expense and burden on rural facilities." The agency explained that states with fewer CON rules would receive higher scores.

What CON laws do

CON laws give a state approval authority over the construction or expansion of any healthcare facility. A provider has to prove a community need for a new service before it can offer it. According to the National Conference of State Legislatures, more than 30 states plus Washington, D.C., enforce some version of the requirement.

The laws were meant to curb monopolies and rising costs. Critics say they did the opposite. In their telling, CON rules have raised healthcare prices, stalled needed facilities, and kept rural patients from new technology.

That criticism is not new. The laws have faced scrutiny for decades under both Republican and Democratic administrations, and legislators in several states had already been pushing to end them.

Six states signal changes

Six states indicated in their applications that they plan to revisit their laws: Tennessee, Alaska, Connecticut, Delaware, Iowa and Mississippi.

Tennessee has done the most. In a bipartisan vote in April, its lawmakers passed a bill that will unravel most of the state's remaining CON rules over the next four years.

The other five have said they will take a look. Nothing in the record shows any of them has repealed or rewritten its laws yet.

A federal carrot, not a new idea

Tying money to state policy is an old tool. Maureen Hensley-Quinn, a researcher at the National Academy for State Health Policy, noted in an email that the Obama administration paid millions of dollars in performance bonuses to states that made it easier for children to enroll in federally funded health insurance.

"It's not the first time the federal government used funding as a state carrot (versus using a stick) to encourage alignment on an administration's policy goal," she said.

Hensley-Quinn said the funding was an opportunity to take a hard look at whether policies like CON laws are truly worth it. She also urged caution.

"States need to carefully weigh the trade-offs of supporting a 'voluntary' federal policy no matter what," she said. "Additional federal financing, especially in tight state budget years, can tip the scale."

The program is formally voluntary, but a state that wants a higher score has a financial reason to move quickly. The administration's approach, as the application notice makes plain, has forced states to reckon with laws that many legislatures had debated for years without acting.

What comes next

Intent and law are not the same thing here. Six states told CMS they plan to revisit their CON rules, but Tennessee is the only one with a bill on the books, and its phase-out runs four years. The notice ties scoring to how many CON rules a state keeps, so the five states that have only signaled plans have not yet earned the credit those commitments might bring.

It is unclear whether Alaska, Connecticut, Delaware, Iowa and Mississippi turn their application language into statutes, and whether other states with CON laws decide the money is worth the trade-off.