President Trump’s administration is pushing states to tear down old hospital red tape, dangling billions in rural health money to states willing to scrap laws that block new hospitals from opening.
Quick Take
- The Trump administration is tying part of a $50 billion rural health fund to states repealing certificate-of-need laws.
- The Department of Justice says these laws block new hospitals instead of protecting rural care.
- Alabama already passed a law phasing out most of its certificate-of-need rules over four years.
- Rural hospital leaders warn repeal could let big chains cherry-pick profitable care and shut down smaller hospitals.
What Certificate-Of-Need Laws Actually Do
Certificate-of-need laws force hospitals to get government permission before building new facilities or buying big equipment. States created these rules decades ago to stop wasteful overbuilding. Critics call them government gatekeeping that protects existing hospitals from competition instead of helping patients get care closer to home.
New York started the trend in 1964. Congress later tied federal funding to these planning rules in 1974, pushing most states to adopt them. Congress dropped that funding requirement in 1986, and many states repealed their laws soon after. Roughly three dozen states still keep some version of these rules on the books today.
Justice Department Says The Rules Hurt Rural Patients
The Department of Justice’s Antitrust Division wrote a letter backing Alaska’s push to repeal its certificate-of-need law. The letter stated the laws “do not ensure access to care in rural areas” and instead act “as a barrier to entry, leading to lower access to care and less innovation”. The department pointed to a 2016 study linking these laws to 30 percent fewer rural hospitals per 100,000 people.
A separate study on rural healthcare supply backs that finding up. Researchers found that repealing certificate-of-need laws “causes a substantial increase in hospitals in both rural and urban areas”. Those new hospitals tend to be smaller with fewer beds, which the study’s authors say shows real competition taking hold rather than just existing hospital chains expanding their footprint.
A 2024 review of the research backs up the skepticism toward these laws. Out of 190 tests measuring whether the laws improved access to care, 52 percent found access actually got worse, 38 percent found no real difference, and only 10 percent found access improved. The Justice Department summed it up bluntly: the laws have not been shown to control costs, improve quality, or boost access.
Billions In Federal Money Tied To Repeal
The administration built real leverage into its $50 billion, five-year Rural Health Transformation Program. States that commit to repealing or loosening their certificate-of-need laws score better on their funding applications, CBS News reported. Alabama lawmakers already passed legislation to unwind most of the state’s remaining rules over the next four years.
Tying federal dollars to a specific policy change gives states real incentive to act fast, but it also opens the door to criticism that Washington is buying its way into state healthcare decisions rather than letting evidence alone make the case. States are now racing to show federal officials they will spend the rural health money wisely, with some rewriting long-standing regulations just to stay competitive for the grants.
Rural Hospital Leaders Push Back Hard
Not everyone in rural healthcare is cheering. Martin Chaney, chief executive of Maury Regional Health in Tennessee, warned that repeal would push hospital expansion toward wealthier areas with better insurance coverage, not the communities that need new care options most. He argued repeal would raise costs for vulnerable patients and thin out staffing at hospitals already struggling to get by.
Williamson County Commissioner Judy Herbert, who also sits on the Williamson Health board, went further. She warned that big hospital systems could grab profitable procedures away from smaller rural hospitals, forcing those facilities to close or sell out entirely. In Kentucky, healthcare advocate Proctor pointed to St. Elizabeth Healthcare’s purchase and later closure of an Owen County hospital as a real-world example of what she fears could happen more broadly.
These are legitimate concerns worth watching closely as states move forward. But the evidence driving this push is hard to ignore. Decades of government permission slips have not stopped rural hospitals from disappearing, and the data suggests the rules may have made things worse, not better. Cutting red tape and letting markets respond to real community need fits squarely with conservative instincts about limited government and individual choice.
The real test comes next: will newly opened hospitals in Alabama, Alaska, and wherever else follows actually deliver emergency rooms, maternity wards, and surgery suites rural families need, or just cherry-pick the easy, profitable stuff? No federal agency has laid out a clear plan to track closures, service cuts, or hospital solvency once these laws disappear. Conservatives who back deregulation should also demand real accountability for how this money gets spent.
Sources:
cbsnews.com, justice.gov, arxiv.org
