Certificate of Need (CON): How Regulation Shapes ASC and MOB Real Estate Development
A Certificate of Need, or CON, is a state-administered approval process that requires healthcare providers to prove community need before building, expanding, or acquiring certain facilities or services.
In CON states, healthcare growth is not purely market-driven. Permission comes first. Real estate follows.
CON requirements vary by state, but commonly apply to:
- New hospitals or ambulatory surgery centers.
- Added inpatient beds, operating rooms, or procedure rooms.
- Major imaging equipment such as MRI, CT, or PET.
- Expansion of regulated service lines like cardiac, oncology, or inpatient behavioral health.
Some states regulate aggressively. Others selectively. A growing number have eliminated CON entirely.
- As of 2026, 35 states plus Washington, D.C. still have some form of CON laws.
- 15 states do not have CON laws, including Texas, California, Arizona, Colorado, and Pennsylvania.
US states that have Certificate-Of-Need Laws
CON vs Non-CON States: The Core Difference
• Non-CON states: Expansion follows demand, capital, and speed to market
• CON states: Expansion follows approvals, timelines, and political process
This distinction directly impacts site selection, deal timing, feasibility, and capital risk.
Real Estate Implications for ASCs
- Site selection is regulatory first: In CON states, the optimal site is often the one most defensible in an approval process, not the one with the best demographics.
- Scarcity supports pricing: Approved or licensed ASCs behave like entitled assets. Existing facilities often trade at premiums due to replacement difficulty.
- Longer timelines increase carry risk: Land control, design, legal fees, and consultants can sit idle for years during reviews, objections, or appeals.
- Hospital alignment matters: Formal preference is rare, but hospital support can materially improve approval odds. Opposition can stop a project outright.
- Fewer but larger projects: CON frameworks tend to favor fewer approvals with broader service offerings to justify demonstrated need.
Real Estate Implications for MOBs
- MOBs absorb outpatient demand: When ASC approvals are constrained, outpatient care shifts into clinics, imaging, and specialty suites within MOBs.
- Flexibility is underwritten upfront: Developers favor designs that allow future imaging, minor procedures, or potential ASC conversion if rules change.
- Tenant stickiness improves: Limited relocation options in CON states support longer lease terms, renewals, and stable occupancy.
- Health systems shape leasing: Hospital systems often control referrals and influence CON outcomes, making hospital-adjacent MOBs more liquid.
- Regulatory insulation attracts capital: MOBs benefit from regulatory barriers without direct exposure to CON litigation risk.
Why This Matters for Real Estate Decisions
- Non-CON states: Real estate follows demand
- CON states: Real estate follows permission
Understanding that difference is critical for operators, developers, and investors underwriting outpatient healthcare assets.
