Trump Administration Ties Rural Health Funding to Repeal of Hospital Construction Laws

POLICY WIRE — Washington, D.C. — The Trump administration is leveraging federal financial incentives to pressure states into dismantling or relaxing certificate of need (CON) laws, which govern the construction and expansion of healthcare facilities. A portion of the $50 billion allocated for the five-year Rural Health Transformation Program is now tied to these policy shifts, with the administration signaling that states willing to roll back their regulatory oversight will receive higher scores on their funding applications.

Certificate of need laws were originally designed to prevent monopolies and control rising costs by requiring providers to demonstrate a community need for new services. However, critics argue these regulations have historically inflated healthcare prices, delayed the development of essential facilities, and restricted patient access to modern medical technology. According to the National Conference of State Legislatures, more than 30 states and Washington, D.C., currently maintain some form of these regulations.

The Centers for Medicare & Medicaid Services has explicitly labeled these laws as an additional expense and burden on rural facilities within its guidance to states. While the push to reform these policies has spanned both Republican and Democratic administrations, the current federal strategy has accelerated the timeline for state-level legislative action. Six states have already indicated plans to revisit their existing statutes as part of their grant applications.

Maureen Hensley-Quinn, a researcher at the National Academy for State Health Policy, noted that the federal government is using funding as a carrot to align states with administration goals. She compared the strategy to performance bonuses used during the Obama administration to boost children’s health insurance enrollment. While the funding can be a vital lifeline for states facing tight budgets, Hensley-Quinn warned that officials must carefully weigh the trade-offs of abandoning these regulatory frameworks.

Tennessee has emerged as a leader in this shift, passing bipartisan legislation in April to dismantle most of its remaining CON rules over the next four years. Other states, including Alaska, Connecticut, Delaware, Iowa, and Mississippi, have also expressed interest in loosening their requirements. South Carolina, which voted to end most of its rules in 2023, will cease requiring applications for new hospital construction or expansion in January, limiting the process to nursing homes.

Despite the momentum for deregulation, experts warn of potential long-term consequences, such as a loss of transparency regarding hospital ownership and financial health. Hensley-Quinn pointed out that without the voluminous reporting required by CON laws, states may struggle to monitor private equity involvement or track the stability of their health systems. This concern is shared by some local leaders who fear that removing these barriers could lead to the closure of smaller, independent nonprofit hospitals.

In Tennessee, the debate remains polarized. Martin Chaney, CEO of Maury Regional Health, argued that repealing these laws could create rural healthcare deserts by encouraging large systems to cherry-pick profitable areas. Conversely, proponents like Maury County Commissioner Kevin Markham maintain that increased competition provides patients with necessary choices. The tension was highlighted in 2025 when Williamson Health, facing mounting pressures, agreed to a $900 million sale to Ascension St. Thomas.

Reporting by Policy-Wire (PW)