Since 1972, when the General Assembly adopted Kentucky’s first healthcare CON laws, 1  researchers have found evidence that CON laws fail to deter hospital investment. 2  Yet, Kentucky has continued to expand its CON laws since the 1970s. Today, they apply to much more than just hospitals and their purposes have evolved. The following is the statement of legislative findings and purpose for Kentucky’s CON program. This statement has remained fairly consistent since 1996:

The General Assembly finds that the licensure of health facilities and health services is a means to insure that the citizens of this Commonwealth will have safe, adequate, and efficient medical care; that the proliferation of unnecessary health-care facilities, health services, and major medical equipment results in costly duplication and underuse of such facilities, services, and equipment; and that such proliferation increases the cost of quality health care within the Commonwealth. Therefore, it is the purpose of this chapter to fully authorize and empower the Cabinet for Health and Family Services to perform any certificate-of-need function and other statutory functions necessary to improve the quality and increase access to health-care facilities, services, and providers, and to create a cost-efficient health-care delivery system for the citizens of the Commonwealth. 3

While these goals sound laudable, there’s little evidence that CON laws have achieved them. 4  As early as 1986, Congress recognized that CON laws failed to control costs. 5  And the vast majority of academic literature establish that CON laws do the opposite of their stated purpose. Despite the evidence, the General Assembly and the Cabinet for Health and Family Services (Cabinet) have been reluctant to reform the Commonwealth’s CON laws or regulations.

In 2013, in anticipation of changes to the healthcare landscape resulting from the Affordable Care Act (ACA), the Commonwealth commissioned the Health Care Facility Capacity Report (Capacity Report) to determine whether Kentucky had an appropriate level of healthcare facilities and services. 6  The Capacity Report estimated that utilization of outpatient services could increase by 6% and inpatient services could increase by 3% in response to the ACA. 7  Access to mental health facilities was a particular concern given that Kentucky’s “utilization of inpatient psychiatric care [was] about 50% higher than the national benchmark.” 8  

The Capacity Report included several recommendations like eliminating the CON requirements for ambulatory surgical centers (ASCs), home health agencies, and imaging services like MRI and PET. 9  The Capacity Report noted that CON laws were leading to harm, such as causing existing ASCs to operate above capacity 10  and discouraging home health agencies from opening in counties where service was needed. 11  And, the Report found the CON program “may even be impeding competition.” 12  Plus, CON laws were unnecessary for MRI and PET equipment because the market for “mature” “imaging technologies” “self-regulates.” 13  Eliminating CON laws for imaging would mirror earlier decisions to discontinue CON for x-rays and CTs. 14

Unfortunately, the General Assembly never implemented these recommendations. A decade later, Kentucky’s CON requirements for ASCs, home health agencies, and MRI and PET equipment remain; as do CON requirements for many other facilities, services, and types of equipment.

Three years after the Capacity Report came out—following its own internal study process—the Cabinet used its regulatory authority to make two minor changes. It reclassified adult day health programs and outpatient healthcare as eligible for the nonsubstantive application review process. 15  As explained below, nonsubstantive review is an accelerated CON application process. The Cabinet had originally proposed the same changes for ambulance services, chemical dependency treatment beds, and MRI, but succumbed to industry pressure and scrapped those plans.

In 2019, the General Assembly made some modest reforms to the CON program, including removing skilled nursing facilities, primary care centers, retail clinics, rehabilitation facilities, rural health clinics, and certain mobile services. 16  The 2019 amendments also increased the expenditure minimums that trigger CON requirements in some cases. The most recent expenditure minimum available on the Cabinet Division of Certificate of Need’s website at the time of publication was $3,740,706.00, effective December 1, 2022. 17

As of July 2023, Kentucky requires a CON for the following services and technologies:

  1. Acute care hospital beds
  2. Adult day health
  3. Ambulance providers
  4. Birth centers
  5. Cardiac catheterization, freestanding or mobile
  6. Chemical dependency treatment programs or beds
  7. Comprehensive physical rehabilitation beds
  8. Freestanding ASCs
  9. Freestanding emergency departments
  10. Home health agencies
  11. Hospice services, residential or facilities, if provided by a non-hospice entity
  12. Hospitals
  13. Hospital beds
  14. Intermediate care facilities (ICFs)
  15. ICFs for individuals with intellectual or developmental disabilities
  16. Long term care beds
  17. Megavoltage radiation equipment, freestanding or mobile
  18. MRI equipment, freestanding or mobile
  19. New technological developments
  20. Nursing homes
  21. Nursing home beds
  22. Open heart surgery
  23. Organ transplantation
  24. Personal care homes
  25. PET equipment, freestanding or mobile
  26. Prescribed pediatric extended care facilities
  27. Private duty nursing facilities
  28. Program of all-inclusive care for the elderly if it includes a CON service
  29. Psychiatric hospital beds
  30. Psychiatric residential treatment facilities levels I and II
  31. Relocating a facility or replacing existing equipment
  32. Special care neonatal beds

Note that the list includes services that are unlikely to be over-prescribed, such as birth centers and neonatal units. It also includes services like home healthcare and hospice care that are often thought of as low-cost alternatives to other modes of care. Finally, the list includes services in high demand that cater to vulnerable or underserved populations like psychiatric care and chemical dependency treatment.

In 2019, while the General Assembly was modifying the law, Dipendra and Kishor sued the Cabinet, arguing that the ban on their ability to open a home health agency prohibited them from exercising their constitutional right to earn a living. 18  At the outset of the case, the district court rejected the defendants’ motions to dismiss. In describing the potential problems with CON laws, the court asked what “if Michigan had told Henry Ford he couldn’t build a Model T because the market had enough Buicks[?]” 19  Or what if the government decided there was “no need for iPhones (2007) because of Blackberries (1999)[?]” 20  Ultimately, the court allowed the case to proceed because “[a]s important as innovation-through-competition has been to those industries, it’s arguably even more important in healthcare, where the stakes are life and death.” 21

After two more years of litigation, Dipendra and Kishor lost their case under the government-friendly rational basis test. On appeal, Chief Judge Jeffrey Sutton of the 6th U.S. Circuit Court of Appeals confirmed that the rational basis test requires judges to uphold “silly,” “unjust,” “unfair,” “unwise,” “stupid,” “ineffective,” and “incorrigibly foolish” laws. 22  Judge Sutton also noted:

  • “Since 1987, the federal government—across different agencies and ideologically diverse administrations—continues to advocate against [CON] laws, noting their tendency to increase costs while decreasing access and quality of care . . . . [P]ublic defenders of such laws are a shrinking minority.” 23
  • “[T]he judgment that [CON laws were] a failed experiment has the ring of truth to it. Were we Kentucky legislators ourselves, we would be inclined to think that certificate-of-need laws should be the exception, not the rule, and perhaps have outlived their own needs.” 24

In 2023, the General Assembly adopted HB 334, which makes it easier for existing intermediate care facilities for individuals with intellectual disabilities (ICF/ID) to get CONs to add beds. This legislation was an attempt to address the existing seven-to-ten-year waitlist for a bed in an ICF/ID.

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