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This piece first appeared in the Louisville Courier-Journal.
In 2017, two Nepali immigrants in Louisville tried to open a home health agency to serve neighbors who couldn't find care in their own language. The state turned them down. Louisville already had enough home health providers by the state's count — never mind that none of them spoke Nepali.
Two years later, a proposed $24 million ambulatory surgical center in Fort Mitchell collapsed after a rival hospital tied it up in court for more than two years. About 170,000 Kenton County residents lost out on additional outpatient surgery options. Kentucky has less than half the national average of ambulatory surgical centers per capita.
In 2022, UofL Health asked to convert 33 acute care beds into 33 adult psychiatric beds. The state said no, even after the hearing officer acknowledged the formulas used to measure "need" were probably flawed.
These are the predictable results of Kentucky's certificate of need laws, which require state permission before a provider can open a clinic, add beds or buy major equipment. On one widely used measure of CON stringency, Kentucky scores a perfect 100. Indiana scores 15. Ohio scores 5. Both are adding health care capacity faster than Kentucky.
The cost of CON regulations
CON laws were sold in the 1970s as a tool to control costs and prevent duplication. After 50 years, the evidence shows they did neither. What they reliably do is give incumbent hospitals leverage over potential competitors. When an existing provider formally opposes a CON application in Kentucky, the approval rate drops from 71% to 43% percent, and the average decision takes nearly twice as long. Plenty of would-be providers look at that process and never bother applying.
The costs show up in the data. States with CON programs have 8% higher premature mortality than states without them. Kentucky ranks seventh-worst in the country on years of life lost before age 75. Heart failure patients in CON states are more likely to die within 30 days. So are pneumonia patients. So are surgical patients with treatable complications.
Meanwhile, 114 of Kentucky's 120 counties are federally designated primary care shortage areas. 115 are mental health shortage areas. Kentucky needs more than 420 additional primary care and mental health providers just to meet basic adequacy benchmarks. The current regulatory regime makes it harder, not easier, for providers to set up in the counties that need them most.
Fixing this doesn't require dismantling the whole system at once, even if we’d encourage that. There are a handful of straightforward steps the General Assembly can take.
An unkept promise
Raise the dollar thresholds that trigger CON review so routine renovations and equipment upgrades aren't dragged through months of paperwork. Set firm timelines for decisions and limit the ability of competitors to weaponize hearings against rivals. Exempt mental health and substance use treatment from CON entirely — given the overdose toll across Eastern Kentucky and the Ohio River counties, there is no defensible reason to keep gatekeeping psychiatric beds and treatment facilities. Exempt rural providers so investment can flow where shortages are worst. End CON requirements for lower-cost alternatives to hospital care, including ambulatory surgical centers, dialysis, home health and hospice. And codify emergency flexibility, so the next public health crisis doesn't require an executive order to let hospitals add beds.
Most of these reforms have already been tried elsewhere. Indiana and Ohio didn't fall apart when they pared back their CON programs. Their patients ended up with more choices and shorter drives.
The defense of Kentucky's CON regime rests on a promise it has not kept: that restricting supply lowers costs and protects rural hospitals. The research doesn't support either claim. What CON actually does is protect the providers who got there first. It is common sense that we shouldn’t let McDonalds decide if a Chick-fil-a is allowed to open nearby. We should follow this to its logical conclusion.
Kentuckians deserve a health care system built around patients, not incumbents. The evidence is clear: the General Assembly should start dismantling the worst of these laws in the coming session.
Caleb O. Brown is the CEO of the Bluegrass Institute. Liam Sigaud is a research analyst with the Knee Regulatory Research Center working within the fields of health and labor economics. Edgar Orozco is a third-year Ph.D. student in economics at West Virginia University concentrating in health and urban economics.
This piece is based on the recent Bluegrass Institute report Certificate-of-Need Laws in Kentucky: Current Status and Opportunities for Evidence-Based Reforms.
