Should Minnesota Reinstate a Certificate of Need Program for Health Care Capital Expenditures?

The Minnesota Department of Health regulates capital investments made by hospitals, ambulatory surgery centers, diagnostic imaging centers, and physician clinics. The primary purpose of these regulations is to reduce health care spending by preventing the development of excess health care supply capacity. Most states regulate health care investments using a certificate-of-need (CON) law. CON programs require “prospective” review of expenditures, meaning that health care providers must obtain permission from the state before making major capital investments. Minnesota has not maintained a formal CON program since 1984. Instead, Minnesota mainly uses a “retrospective” review process in which the state reviews capital investments only after the provider has already made an investment. Analyses by the state have determined that current capital expenditure regulations are not providing significant cost control for Minnesota’s health care system. This report examines whether reinstating a CON program would improve the law’s effectiveness in controlling health care costs, and examines the impact that CON would have on other dimensions of Minnesota's health care system, such as quality and access to care. Based on existing empirical literature, this report concludes that there is insufficient evidence to justify the adoption of a CON program in Minnesota.