The Trump administration has tied federal funding for states to whether they end or loosen certificate of need laws that regulate the construction of new hospitals, with a handful of states poised to comply.
A chunk of the $50 billion available to states through the five-year Rural Health Transformation Program is partly contingent on policy commitments. The administration told states it would score their applications higher if they walked back their certificate of need laws. Six states indicated plans to revisit their laws in their applications.
What Are Certificate of Need Laws?
Certificate of need laws require healthcare providers to prove a community need for a new service before building or expanding. The laws were intended to curb monopolies and rising costs. But critics say they have raised healthcare prices, stalled needed facilities, and barred rural patients from new technology.
More than 30 states, plus Washington, DC, enforce some form of certificate of need law, according to the National Conference of State Legislatures. Legislators in several states have pushed to end the laws for decades. But the Trump administration’s decision to tie the policies to funding has forced states to reckon with them quickly.
The Federal Leverage
The Rural Health Transformation Program was added to Trump’s One Big Beautiful Bill Act as an initiative to modernize healthcare in remote areas. The Centers for Medicare & Medicaid Services called certificate of need laws “an additional expense and burden on rural facilities” and explained how states with fewer rules would get higher scores.
“It’s not the first time the federal government used funding as a state carrot to encourage alignment on an administration’s policy goal,” said Maureen Hensley-Quinn, a researcher at the National Academy for State Health Policy. She noted that President Barack Obama’s administration included performance bonuses for states that made it easier for children to enroll in federally funded health insurance.
The Tennessee Case
Tennessee has taken the most concrete action. In a bipartisan vote in April, state lawmakers passed a bill that will unravel most of its remaining certificate of need rules over the next four years. Alaska, Connecticut, Delaware, Iowa, and Mississippi have also said they would consider ending or loosening their laws.
Tennessee lawmakers had pushed to change the law for years but did not pass sweeping legislation until the state faced losing federal funding. In 2024, the state’s hospital association opposed a repeal effort, warning it would harm vulnerable patients by driving up costs and thinning hospital staff.
Martin Chaney, CEO of Maury Regional Health, wrote that ending the law would create rural healthcare deserts because hospitals would expand in profitable areas, cherry-picking patients and increasing the gap in access to care in rural communities.
A month later, TriStar Health — owned by HCA Healthcare, the largest hospital company in the US — applied for a certificate of need to build a hospital just 20 minutes north of Maury Regional Medical Center. HCA received approval despite brief opposition.
The Warning
As more states consider removing their certificate of need laws, Hensley-Quinn warns of unintended consequences. Fewer records will exist to help states track hospital ownership. She said frustrated officials have come to her years after their states repealed the laws, saying they lack insight into the financial state of their health systems or how they are managed.
“Without CON, without ownership reporting, and without an entity that monitors transactions or providers in that way, there’s no way for you to know,” Hensley-Quinn said
The Bottom Line
The Trump administration is using $50 billion in rural health funding to pressure states into repealing certificate of need laws. Six states have indicated plans to revisit their rules, with Tennessee already passing legislation to unwind most of its law. Supporters say the laws drive up costs and block rural patients from new technology. Critics warn that repealing them could create rural healthcare deserts and leave states without oversight of hospital ownership. The administration says the funding is a carrot, not a stick. States facing tight budgets may not see it that way.
My Opinion
The federal government is supposed to help rural hospitals, not hold their funding hostage to force states into repealing laws that protect them. But that is exactly what the Trump administration is doing.
Certificate of need laws are not perfect. They can be slow, bureaucratic, and protective of incumbents. But they exist for a reason: to stop hospitals from opening in wealthy areas while ignoring poor ones. Martin Chaney, the CEO of a rural Tennessee hospital, warned that repealing the law would create healthcare deserts because hospitals would cherry-pick profitable patients and leave rural communities behind. Within a month of his warning, HCA Healthcare — the largest hospital company in America — applied to build a new hospital 20 minutes from his.
The administration says it is just using a carrot, not a stick. But when you are a state with a tight budget and $50 billion on the table, a carrot feels like a stick. Tennessee lawmakers had resisted repealing certificate of need for years. They did it when the money was on the line.
If the administration genuinely wanted to help rural healthcare, it would fund hospitals without demanding they give up their regulatory protections. Instead, it is using rural patients as leverage to win a political fight.
