Certificate of Need (C.O.N.) programs are aimed at restraining health care facility costs and facilitating coordinated planning of new services and facility construction. Many "CON" laws initially were put into effect across the nation as part of the federal "Health Planning Resources Development Act" of 1974. Despite numerous changes in the past 30 years, most states retain some type of CON program, law or agency as of 2016.

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Intent and Structure of CON

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The basic assumption underlying CON regulation is that excess capacity stemming from overbuilding of health care facilities results in health care price inflation. Price inflation can occur when a hospital cannot fill its beds and fixed costs must be met through higher charges for the beds that are used. Bigger institutions generally have bigger costs, so CON supporters say it makes sense to limit facilities to building only enough capacity to meet actual need or demand.

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CON programs originated to regulate the number of beds in hospitals and nursing homes and to prevent purchasing more equipment than necessary. Mandatory regulation through health planning agencies determined the most urgent health care needs, contributed to solutions for these needs and attempted to manage the fluctuations in prices often found in a competitive market. The intent was that new or improved facilities or equipment would be approved based primarily on a community’s genuine need. Statutory criteria often were created to help planning agencies decide what was necessary for a given location. By reviewing the activities and resources of hospitals, the agencies made judgments about what needed to be improved. Once need was established, the applicant organization was granted permission to begin a project. These approvals generally are known as "Certificates of Need."