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Why CON Laws Matter in Healthcare Real Estate

Sunday, February 1, 2026 16:01

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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

Certificate of Need Map of States — Image credit: PiMaster3, CC BY-SA 4.0, via Wikimedia Commons

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.

The post Why CON Laws Matter in Healthcare Real Estate appeared first on Coy Davidson – The Tenant Advisor.

Source: https://coydavidson.com/why-certificate-of-need-laws-matter-in-healthcare-real-estate/

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