Trump dangles rural health dollars to push states to change hospital laws

The Trump administration has hinged federal funding for states on whether they end or loosen powerful but controversial laws that regulate the construction of new hospitals — with a handful of states poised to comply.

A chunk of the $50 billion available to states through the five-year Rural Health Transformation Program is partly contingent on policy commitments. The administration told states it would score their applications higher if they walked back their certificate of need, or CON, laws, which give a state approval authority over the expansion or construction of any healthcare facility. Six states indicated plans to revisit their laws in their applications.

Certificate of need laws, which require that a healthcare provider prove a community need for a new service, were intended to curb monopolies and rising costs. But critics of the laws say they’ve instead raised healthcare prices, stalled needed facilities, and barred rural patients from new technology. More than 30 states, plus Washington, D.C., enforce some sort of certificate of need law, according to the National Conference of State Legislatures.

Legislators in several states have been pushing to end the laws, which have faced scrutiny for decades — under Republican and Democratic administrations. But the Trump administration’s aggressive approach to tie the policies to funding has forced states to reckon with their laws quickly.

The Rural Health Transformation Program was added to President Trump’s signature One Big Beautiful Bill Act as an initiative to modernize healthcare in remote areas. The Centers for Medicare & Medicaid Services, in its notice to states applying to the program, called certificate of need laws “an additional expense and burden on rural facilities” and explained how states with fewer certificate of need rules would get higher scores.

“It’s not the first time the federal government used funding as a state carrot (versus using a stick) to encourage alignment on an administration’s policy goal,” Maureen Hensley-Quinn, a researcher at the National Academy for State Health Policy, said in an email. She noted that President Barack Obama’s administration included millions of dollars in performance bonuses for states that made it easier for children to enroll in federally funded health insurance.

Hensley-Quinn said the funding “carrot” was an opportunity to take a hard look at whether policies like certificates of need were truly worth it.

“States need to carefully weigh the trade-offs of supporting a ‘voluntary’ federal policy no matter what,” she said, “and additional federal financing, especially in tight state budget years, can tip the scale.”

Obama, Trump on same page

Since the Rural Health Transformation Program became law last year, Tennessee has taken the most concrete action. In a bipartisan vote in April, state lawmakers passed a bill that will unravel most of its remaining certificate of need rules over the next four years. Alaska, Connecticut, Delaware, Iowa, and Mississippi have also said they would consider ending or loosening their laws.

“If there’s an issue where you can have President Obama and President Trump in agreement on something, that tells you the idea probably has some merit,” Wes Climer, a Republican state senator in South Carolina, said in 2021, supporting the repeal of that state’s certificate of need law. The legislature voted in 2023 to end most rules in the law, and in January it will stop requiring certificate of need applications for new hospital construction or expansion, leaving them only for nursing homes.

Some certificate of need laws require approval for changes as minor as a new piece of expensive equipment. In North Carolina, a hospital that won a certificate of need to build a much-needed facility was mired in a court battle for three years before breaking ground in 2026.

As more states consider removing their certificate of need laws, Hensley-Quinn warns of unintended consequences: Fewer records will exist that help states track hospital ownership.

Hensley-Quinn said frustrated state officials have come to her years after their states repealed certificate of need laws, saying that even with a licensure process, they don’t have insight into the financial state of their health systems or facilities, or how they’re managed. Certificate of need laws force companies seeking a new foothold in the state to submit voluminous applications. Once the laws are gone, few regulations force transparency. That leaves states unaware when a health system contracts with private equity to provide hospital services, for example.

“Without CON, without ownership reporting, and without an entity that monitors transactions or providers in that way, there’s no way for you to know,” Hensley-Quinn said.

Tennessee’s certificate of need law

Tennessee lawmakers had pushed to change the state’s certificate of need law for years but didn’t pass sweeping legislation until it faced losing out on federal funding. Like all states, Tennessee is set to receive an equal share of half of the Rural Health Transformation Program’s grants, while the other $25 billion in funding is contingent on other factors, including states’ policy commitments.

In 2024, the state’s hospital association opposed a repeal effort in a letter penned by 12 hospital and health system leaders, many serving rural areas, though that more limited legislation passed anyway.

A repeal would harm vulnerable patients by driving up costs and thinning existing hospital staff, said Martin Chaney, CEO of Maury Regional Health, a system in rural Middle Tennessee south of Nashville. Ending the law would create rural healthcare deserts, Chaney wrote in the letter, because hospitals would choose to expand in areas that were already the most profitable, where residents had a range of health insurance providers.

“The premise that eliminating CON regulations will expand health care opportunities by increasing competition is not true for ALL Tennesseans,” Chaney wrote. “Instead, it would result in cherry-picking and increasing the gap in access to medical care in rural areas.”

A month later, TriStar Health — owned by the largest hospital company in the U.S., for-profit HCA Healthcare — applied for a certificate of need to build a hospital just 20 minutes north of Maury Regional Medical Center. Nashville-based HCA received approval despite brief opposition from Maury Regional Health, the system led by Chaney.

HCA did not respond to requests for comment.

Local leaders are divided on what the new hospital would do to healthcare in the region. “Competition is good,” Maury County Commissioner Kevin Markham told KFF Health News. Markham, like many in favor of the new hospital, said that patients should have options when it comes to choosing where they get hospital care.

But leaders of smaller hospital systems in Tennessee are worried. Judy Herbert, a Williamson County commissioner and board member at Williamson Health, another health system in the area, said ending certificate of need laws will prompt hospital closures. Big hospital systems will become the default for expensive procedures and dominate rural markets, while smaller hospitals that provided those procedures before will lose so much money, they’ll be forced to shutter or sell, Herbert reasoned, echoing the concerns of other advocates of the laws.

“Many challenges have emerged that place increasing pressure on healthcare organizations, especially independent nonprofits like Williamson Health,” that health system’s leadership said in an open letter in July 2025, citing Tennessee’s intentions around certificates of need.

In late July, Williamson Health’s board voted to sell its network of clinics, diagnostic centers, and a more than 330-bed hospital in a $900 million deal with Ascension St. Thomas, part of one of the largest healthcare systems in the nation.

KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF — the independent source for health policy research, polling, and journalism.

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