Tennessee legislators are taking an important step toward improving their health care system, which is struggling to deliver for patients. A recent study ranked Tennessee among the worst states in the country for health care, highlighting challenges in access, cost, and quality. In response to these challenges, the Tennessee Senate recently passed SB 1369, a bill that would remove certificate of need (CON) requirements for acute care hospitals, satellite emergency departments, and cardiac catheterization. The bill still needs to pass the House before heading to the governor’s desk.
As it currently stands, Tennessee’s CON law requires health care providers to get government permission before they can open specific facilities, expand capacity, or offer certain services. This means that the state gets to decide whether more health care is “needed” before providers are allowed to invest in their local communities and compete in the market. Lawmakers are now reconsidering these restrictions, which is a welcome development for providers and patients alike.
The fundamental problem with CON laws is straightforward. When a community grows or the needs of patients change, providers should be allowed to promptly respond in the same way businesses in other sectors do: by expanding capacity, innovating, and competing to serve more people. CON laws distort this process by putting unelected bureaucrats in charge of determining whether new facilities or services can exist in the first place. Rather than allowing providers to respond to demand, CON slows necessary expansions and shields incumbent providers from competition. The Federal Trade Commission has urged the state to repeal these laws and has found that CON regulations “create barriers to entry and expansion, limit consumer choice, and stifle innovation.”
These dynamics are reinforced by a “competitor’s veto” which enables already established providers to challenge and delay new entrants seeking to expand or open facilities. In practice, this means incumbents can hijack the CON process to block potential competitors, protecting their market share instead of competing on cost and quality.
From this, it is clear that the CON system has been used to stifle competition. This is especially relevant in Northeast Tennessee, where the state’s certificate of public advantage (COPA) law has concentrated market power in Ballad Health, the region’s dominant health care provider, further underscoring the risks of policies that limit entry and inhibit competitive pressures.
Supporters of CON laws often argue that these restrictions prevent duplicative services and keep costs under control. However, limiting supply in the face of rising demand directly contradicts the goal of lower costs, as patients are faced with a system that is less competitive and less responsive to their needs. A large body of research suggests that CON laws have limited access, worsened quality, and increased costs instead of delivering their intended benefits.
Tennessee’s own experience demonstrates the consequences. A report from Americans for Prosperity Foundation shows that Tennessee’s CON program was used to deny nearly $1.5 billion in proposed health care investment. Research indicates that CON regulations in the state led to about 8,500 fewer hospital beds, 32 fewer hospitals offering MRI services, and 45 fewer hospitals offering CT scans. These outcomes reflect a system where government regulation has artificially constrained the supply of care, limiting options for patients and reducing access across the state.
The contrast with other states is instructive. The same study that ranked Tennessee near the bottom found New Hampshire to have the best health care system in the country. New Hampshire repealed its CON laws in 2016 and has one of the most free-market-oriented health care systems in the country. This comparison is just one example of a broader trend: states that allow providers to enter the market and expand their services more freely tend to deliver better outcomes for patients than those that tightly restrict supply through regulatory barriers.
If patients are facing limited options and insufficient capacity, the answer is not to make it more difficult to build hospitals or expand services. The solution is to remove barriers that prevent providers from responding to demand. Tennessee legislators are right to rethink a system that treats the provision of health care like a privilege to be rationed rather than a service that should be allowed to grow to meet people’s needs.
If the goal is more access, lower costs, higher quality, and a more competitive health care system, the solution is clear: roll back CON laws and stop letting state planners block investment in care. Tennessee’s Senate has taken a meaningful step in that direction. The House should follow through.
Nicholas Huff is a Policy Intern at Americans for Prosperity.
