At a Glance

• Iowa enacted significant reforms to its certificate of need (CON) program in 2026.
• The reforms ease some regulatory barriers but continue to require CON review for new ambulatory surgery centers.
• Physician-owned ASCs remain central to debates over access, competition, and independent practice.

Estimated read time: 6 minutes

Before an orthopaedic group in most U.S. states can build an ambulatory surgery center (ASC), it must first ask the state government for permission, and in many cases, its competitors are invited to object. This process is known as the certificate of need (CON) and is one of the oldest and most consequential regulatory frameworks in American healthcare. Orthopaedic surgeons encounter it directly whenever they seek to expand surgical capacity outside the hospital. In 2026, Iowa enacted one of the most significant CON reforms in recent years, and the legislation offers a useful lens into a broader national reconsideration of these laws.

A brief history of CON
CON laws are based on a requirement to demonstrate community “need” before constructing facilities, expanding services, or making major capital expenditures. The National Health Planning and Resources Development Act of 1974 effectively conditioned federal funding on states adopting CON programs based on the theory that restraining capital expansion would restrain healthcare costs. Supporters argued that expansion of healthcare resources within a well-supplied geographic area would create “supplier-induced demand,” increasing utilization of potentially unnecessary services. They also argued that private facilities might “cherry pick” commercially insured patients, leaving county hospitals and trauma centers to care for uninsured and government-insured patients.

The federal government repealed the federal incentive structure in the 1980s after concluding the approach had failed to control costs, yet most states retained their programs. Today, roughly three dozen states and the District of Columbia maintain CON laws in some form.

The economic critique of CON is well established. Because incumbent providers are typically notified of ASC applications and may formally oppose them, critics argue that CON can function in practice as a competitor’s veto, creating a mechanism through which incumbent providers oppose new entrants. CON states are associated with roughly 30% fewer hospitals and 14% fewer ambulatory surgical centers per capita than non-CON states.

In Iowa, the state’s CON program is estimated to be associated with 51 fewer hospitals, 30 of them rural, and four fewer ASCs, along with less marketplace competition and higher prices. These associations extend to quality outcomes: A Mercatus Center analysis of Iowa’s CON program found an association between CON regulation and statistically significant higher mortality for pneumonia, heart failure, heart attack, and post-surgical complications in CON-regulated hospitals compared to non-CON hospitals. These are observational findings rather than demonstrated causation, but they point in a consistent direction.

Rural access has shown no consistent improvement either, despite being among the very outcomes the laws were designed to protect. Defenders, principally state hospital associations, counter that CON protects the financial viability of full-service and rural hospitals that subsidize unprofitable service lines with revenue-generating procedural service lines, such as orthopaedic surgery. That tension between protecting incumbent institutions and enabling lower-cost competition is precisely where physician-owned ASCs sit.

What Iowa did
In May 2026, Iowa Governor Kim Reynolds signed House File 2635, a broad health reform package addressing prior authorization, utilization review, artificial intelligence in claims decisions, and the state’s CON framework. The CON provisions, which passed the legislature with unanimous support, make several structural changes.

First, the law raises the monetary thresholds for capital spending proposals that trigger CON review to $4 million, a substantial increase from prior thresholds such as the $1.5 million trigger for major medical equipment. Routine capital projects below these levels may now proceed without state review.

Second, the law narrows the categories of projects subject to review and fully exempts five service lines: outpatient behavioral health including opioid treatment, radiation therapy, cardiac catheterization, organ transplant services, and open-heart surgery.

Third, it reforms the review process itself, eliminating the requirement that applicants demonstrate existing facilities are operating “efficiently” (an ambiguous criterion that allowed for subjective denials), and removing payers from the notification and review process.

Iowa’s reform follows a 2025 law, managed by Iowa state senator Kara Warme, that removed birth centers from CON entirely. Soon after, a new birth center opened in Adel, Iowa, offering an early example of the effects deregulation may have on healthcare access.

Notably, Iowa lawmakers framed the CON reform partly in workforce and rural access terms, citing the state’s participation in the federal Rural Health Transformation grant program. Through this program, Iowa has already received $209 million in first-year funding, part of a five-year, roughly $50 billion national program under which the state could ultimately receive up to $1 billion. The Iowa Medical Society, which championed the broader bill, described the CON updates as supporting a more responsive, patient-centered system.

The ASC question
For orthopaedic surgeons, the most relevant feature of Iowa’s reform may be what it did not do Ñ eliminate the requirement to procure a CON before establishing an ambulatory surgical center. Recent ASC applications, including physician-affiliated surgical center projects in the Des Moines metro area and northwest Iowa, have continued to move through the state’s CON review process, with timelines measured in months to years.

This point matters because the migration of orthopaedic procedures to the outpatient setting is one of the defining trends of the specialty. Physician-owned ASCs also represent one of the few remaining vehicles for orthopaedic surgeons to maintain practice autonomy amid accelerating hospital employment and consolidation. That autonomy has potential benefits for the practicing surgeon: Ownership of an ASC means control over scheduling, staffing, and the surgical environment itself, and it preserves a facility fee and equity stake that employed physicians generally do not have.

Where CON laws gatekeep ASC development, they reduce site-of-service competition, opportunities for lower-cost surgical access for patients, and the viability of independent practices. Research and policy analyses have repeatedly identified ASCs as among the services for which CON restrictions most clearly suppress supply, because hospitals have both the standing and the financial incentive to oppose them.

Iowa’s reform is therefore best understood as meaningful but incomplete from an orthopaedic perspective. Raising thresholds, exempting five service lines, and removing the efficiency criterion and payer participation do make some reviews fairer. But the core competitive bottleneck for surgical specialists, CON review of new ASCs, remains in place.

A national inflection point
Many states have enacted substantial CON repeals or rollbacks in recent years. South Carolina, for example, eliminated CON requirements for outpatient facilities, and remaining CON requirements for new hospitals will sunset at the end of 2026. Even New York, while still one of the strongest and most comprehensive CON states, has moved to raise its review thresholds administratively. The policy consensus that produced CON in the 1970s has eroded, and states are increasingly asking whether a competitor-influenced permission process is a rational way to allocate healthcare capacity in 2026.

Since CON reform is decided at the state level, state orthopaedic societies and medical societies are the main vehicle, just as they were in Iowa, for helping shape and pass reform bills like Iowa’s HF 2635. Surgeons in CON states should understand which projects in their practice environment trigger review, including ASCs, imaging, and capital equipment, and should be prepared to articulate the access and cost case for reform with specific evidence. Orthopaedic residents, many of whom will spend their careers in outpatient surgical settings, have a direct stake in whether those settings can lawfully be built.

The question Iowa has now squarely posed for other states is a simple one: If a birth center, a cardiac catheterization lab, and a radiation therapy suite no longer require a permission slip, why should an orthopaedic surgery center? The answer will shape where, and how affordably, the next generation of musculoskeletal care is delivered.

References

1. Bogart G. Iowans need change: the case for repeal of Iowa’s certificate of need law. J Corp Law. 2020;45(1):221-243.
2. ITR Foundation. Certificate of need law reform could save lives. Published 2025. Accessed 8/24/2026. https://itrfoundation.org/certificate-of-need-law-reform-could-save-lives/
3. Office of Governor Kim Reynolds. Gov. Reynolds releases statement on 2026 legislative session. Governor of Iowa website. Published 2026.
4. Iowa Medical Society: Iowa Medical Society applauds Governor Reynolds’ signature on landmark insurance reform legislation. Iowa Medical Society website. Published 2026. Accessed 8/24/2026. https://www.iowamedical.org
5. Warme, K. The Warme Wire: week 8. Times-Republican. Published 2026.
6. Pacific Legal Foundation. Iowa reform allows for new options for healthcare, expanding access and lowering costs. Pacific Legal Foundation website. Published 2026. Accessed 8/24/2026. https://pacificlegal.org
7. Iowa Department of Health and Human Services. Certificate of need (CON) program. Iowa Department of Health and Human Services website. Published 2026. Accessed 8/24/2026. https://hhs.iowa.gov/certificate-need-con-program
8. Iowa Department of Health and Human Services. Certificate of need application decisions and extensions, 2025-2026. Iowa Department of Health and Human Services website. Published 2026.
9. New York State Department of Health. Proposed amendment of Part 710 of Title 10 NYCRR, certificate of need cost thresholds. Published 2024.