A new report by the Puerto Rico Institute for Economic Liberty and the Pacific Legal Foundation argues that the system, which has been in place for half a century, forces doctors, hospitals, and healthcare entrepreneurs to overcome a significant regulatory hurdle before opening, expanding, or modernizing their services.
Archivo / EL VOCERO
To establish a new hospital in Puerto Rico, prior government authorization is required. This is also required to open certain outpatient facilities, relocate a facility, increase the number of hospital beds, acquire certain medical equipment, make investments worth millions, add certain services, and even implement certain administrative changes.
This is the Certificates of Need and Convenience (CNC) system, a healthcare planning model created more than 50 years ago with the stated goal of preventing unnecessary investments, controlling medical costs, and ensuring that healthcare resources are allocated where the population truly needs them.
But a new study raises exactly the opposite question: Is this structure—designed to organize the healthcare system—now preventing Puerto Rico from responding quickly enough to its crisis of access, doctors, and services?
The report, titled “How Certificates of Need and Convenience Limit Health-Care Investment and Access in Puerto Rico,” was prepared by Ángel Carrión-Tavárez, director of Research and Public Policy at the Institute for Economic Liberty (ILE), and Jaimie Cavanaugh, senior state policy advisor at the Pacific Legal Foundation (PLF). It was published this month and provides an overview of the Puerto Rican system, its regulations, and more than a hundred studies related to the laws known in the United States as Certificates of Need (CON).
Their conclusion is clear: Puerto Rico should repeal the CNC requirement or, at the very least, significantly reduce the activities subject to prior government approval.
“Puerto Rico’s certificates of necessity laws are reducing access to care and increasing health care costs,” Cavanaugh said when presenting the study. “Patients deserve more options, and laws that shield established providers from competition serve only those providers.”
But the issue is not as simple as eliminating a permit. The study itself acknowledges that advocates of these laws argue that they serve to prevent duplicate medical capacity, protect financially vulnerable institutions, and allow for orderly planning of a system in which a clinic or hospital does not operate like any other business. Furthermore, the academic evidence is not consistent across all services and markets.
What the report proposes is to reopen a discussion that Puerto Rico has had before, but now under very different circumstances: an aging population, fewer doctors, enormous disparities in federal funding, and a hospital sector under increasing economic pressure.
A system that originated in the 1970s
Puerto Rico’s Certificates of Need and Convenience Act dates back to 1975 and emerged during a time when the federal government was promoting health care planning systems to curb the rapid rise in medical costs.
The local legislation establishes as public policy that the planning of facilities and services is necessary to meet the needs of the population, control costs, and ensure that services are located where they are needed.
Although the federal mandate that spurred this type of legislation was later rescinded, Puerto Rico retained its framework.
The Department of Health continues to administer the law through its Division of Certificates of Necessity and Convenience, which conducts the initial evaluation of proposals to establish or relocate health facilities or offer new services. The Department itself explains that obtaining the CNC is a prerequisite for applying for other health licenses or authorizations.
The regulation applies to hospitals, diagnostic and treatment centers, rehabilitation centers, outpatient surgery facilities, home health services, blood banks, laboratories, radiology facilities, kidney centers, and other facilities.
Much more than just opening a hospital
One of the findings that the new report uses to gauge the scope of the system is that the CNC Division may receive requests related to 80 different types of regulatory actions during a fiscal year.
That does not mean 80 completely different permits, nor does it mean that all of them require a public hearing. Some matters can be resolved through exemption certifications.
However, because there may be multiple requests within each category, the authors note that the office may process more than 200 cases in a year.
Regulation 9084 illustrates the extent of this oversight. A new facility requires CNC approval regardless of how much it costs to establish. An existing facility needs authorization when it makes a capital investment of $2 million or more.
Authorization is also required to add a service whose operating costs reach $800,000 or more, and to acquire highly specialized medical equipment costing $1 million or more when it is installed in or belongs to a healthcare facility.
But the regulation does not end there. It also applies when a hospital increases the number of beds, reallocates beds among categories, transfers beds from one facility to another, discontinues certain services, relocates the facility, or makes certain acquisitions.
The regulations even list as matters subject to the system the appointment or replacement of a facility’s administrator and certain changes related to its owner, in addition to temporary, permanent, or emergency closures.
For researchers, this broad scope makes the CNC much more than a mechanism for deciding whether Puerto Rico needs another hospital.
It becomes, they argue, a form of ongoing oversight of operational and investment decisions.
Before applying, you have to wait
The authors pay special attention to the time the procedure may take. The formal process begins even before the application is filed.
Regulation 9084 requires the applicant to submit a letter of intent at least 30 days before filing their CNC petition.
Once the application is complete, the Department has up to another 30 days to publish a notice and notify those deemed to be affected.
Those parties, in turn, have 30 days to submit comments and evidence.
When the case requires a public hearing, the Division of Administrative Hearings must provide notice of the hearing at least another 30 days in advance.
Not all of these time limits necessarily apply to every case, nor do all cases go through a hearing. The regulations contain exceptions and more expedited procedures.
However, the authors argue that the regulatory framework can be particularly costly for a new or small provider that must maintain financing, property, equipment, and a business plan while awaiting a determination.
How many MRI machines does a region need?
The debate becomes even more specific when examining how the government determines whether a service is “necessary.”
The regulation uses criteria related to population, territory, and the utilization of existing facilities.
For example, it establishes a standard of one CT scan facility for every 25,000 residents in a subregion.
Furthermore, a new CT scan facility may not be authorized until existing facilities in the area have exceeded certain utilization levels—including 1,000 procedures per year—and it is demonstrated that demand exceeds existing supply.
For magnetic resonance imaging (MRI), the regulation sets a standard of one facility per 50,000 residents in a subregion, and also makes new authorization contingent on the use of existing equipment and a demonstration of additional demand.
In general hospitals, the rule is even more revealing. The regulation sets a benchmark of 2.5 acute-care beds per 1,000 residents and stipulates that a new general hospital will not be authorized unless existing hospitals in the area have operated at an average occupancy rate of 80% over the previous 12 months.
That is precisely one of the central points of the report’s critique. According to its authors, the system requires a business owner or provider to demonstrate to the government that there is economic room to enter a market and, in some cases, makes that possibility contingent on how much patients are using the services of current competitors.
Proponents of the model see it differently: if sufficient capacity already exists, allowing new facilities could fragment the patient base too much, drive up operating costs, and weaken facilities that provide essential services.
That is the dilemma that has plagued these laws for decades.
Competitors may participate in the process
Another particularly controversial issue is the possibility of intervention by existing providers.
The regulations require the identification of similar facilities already operating in the area and allow affected parties to submit comments and evidence during the process.
The report argues that this may provide competitors with a mechanism to delay or hinder the entry of new participants.
The authors note that interviews conducted during the investigation indicated that opposition to new CNCs often comes from established providers. They even cite the claim that one of Puerto Rico’s major hospital networks routinely opposes a large number of applications. The report does not publicly identify the institution in that passage nor does it present an independent analysis of all those files that would allow for quantifying this behavior.
That nuance is important. The study offers a strong structural critique, but it does not demonstrate that every CNC application ultimately faces opposition, nor that all projects suffer extraordinary delays.
A medical crisis that changes the conversation
What has changed radically since Puerto Rico passed its law in 1975 is the state of the healthcare system.
An academic study published in Health Policy OPEN notes, citing data from the Puerto Rico College of Physicians and Surgeons, that between 365 and 500 doctors have left Puerto Rico each year since 2014.
An analysis published in 2025 in JAMA Health Forum estimated that there were approximately 9,809 physicians remaining to care for a population of about 3.2 million people, and noted that 69% of physicians were concentrated in just 10 metropolitan areas.
The shortage is not limited to physicians either. The most recent federal data from the U.S. Health Resources and Services Administration (HRSA) recorded 42 primary care shortage designations in Puerto Rico as of June 30, 2026, corresponding to populations and facilities facing a shortage of healthcare professionals. HRSA estimated that approximately 138 additional professionals would be needed to eliminate those designations.
In dental health, there were 99 designations, with an estimated need for 297 additional professionals, while in mental health there were 74, with a need for about 70 professionals to address the identified shortages.
It is important to clarify that an HPSA designation does not correspond to a municipality nor does it represent an absent physician. It may refer to a geographic area, a population group, or a specific facility.
However, taken together, the figures confirm that difficulty in accessing care is not an isolated perception.
The paradox: Almost everyone has insurance, but seeing a doctor can be difficult
Puerto Rico also presents an apparent contradiction. The report notes that about 94% of the population has some form of health coverage, but actual access is limited by the availability of doctors, specialists, facilities, and services.
Based on sources included in their review, the authors estimate per capita health care spending to be considerably lower than the U.S. average and highlight differences in Medicare and Medicaid funding that place additional pressure on hospitals and health care professionals.
Therefore, Puerto Rico’s problem cannot be reduced to certificates of necessity. The authors themselves identify federal funding, reimbursement rates, professional emigration, the geographic distribution of physicians, and the aging population as parallel obstacles.
And that acknowledgment highlights one of the study’s key limitations: repealing the CNC does not automatically produce more physicians.
The report acknowledges that in markets where there is a shortage of professionals or where reimbursements are too low, removing a barrier to entry might not immediately lead to new facilities or services, because other obstacles would continue to limit supply.
Do CNC machines really drive up healthcare costs?
To answer that question, the authors reviewed an extensive body of literature on CON laws in the United States.
The study identifies more than 128 research studies containing over 450 pieces of empirical evidence and argues that, taken together, the evidence tends to link these programs to higher spending, reduced availability of services, and mixed or negative outcomes in terms of quality.
But even the report itself acknowledges that the results are not uniform. The effects may differ depending on whether the facility is a hospital, an outpatient surgery center, a long-term care facility, or an MRI machine.
They also depend on how restrictive the law is, how long the approval process takes, and what opportunities competitors have to challenge applications.
The National Conference of State Legislatures (NCSL) summarizes this divide precisely.
According to the organization, 35 states and Washington, D.C., maintain some form of CON program, although their scope varies greatly. Twelve states have repealed them entirely or allowed them to expire.
Supporters argue that these programs can prevent duplicate services and underutilized capacity, protect access in vulnerable communities, and limit investments that eventually get passed on to consumers.
Critics argue that they protect existing companies and reduce competition. In 2024, at least 12 states amended their laws, generally to eliminate certain categories, raise thresholds, or streamline processes rather than simply abolishing the entire system.
Puerto Rico has already tried to eliminate it
Nor is this debate new on the island. In 2017, Senate Bill 361 proposed repealing the Certificates of Necessity and Convenience Act on the grounds that it had become a barrier to competition and economic development.
The measure was not approved after facing opposition within the healthcare sector. Years earlier, the system had suffered another major setback.
In 2005, the Court of Appeals for the First Circuit struck down the application of the requirement to new pharmacies in the case of Walgreen Co. v. Rullán. The court ruled that the structure discriminated against interstate commerce by protecting existing pharmacies while imposing obstacles on new competitors.
However, the rest of the CNC structure continued to operate.
An additional problem: the government lacks reliable historical data
Perhaps one of the most significant findings of the new study is not what the Department of Health approved or rejected, but how difficult it is to reconstruct this information.
The researchers obtained information on applications and certificates for fiscal years 2020 through 2024, but they found an anomaly: in some years, there were more approved CNCs than registered applications.
According to the report, the current division director explained that historically, the agency did not consistently maintain organized records of applications, approvals, and denials.
The available files also lack sufficient financial information regarding the value of proposed, approved, or rejected investments.
This creates a problem for both sides of the debate. It makes it impossible to determine precisely how much capital went uninvested due to a rejection, how much money was authorized, what the actual average time to award a grant is, or how many projects were never even submitted because their developers gave up on the process.
For this reason, the report clearly demonstrates the scope of the regulation and uses national evidence to argue its effects, but it does not calculate a specific figure for lost investment in Puerto Rico attributable exclusively to the CNCs.
Nor does it specify how many patients have had to wait longer for a service as a direct result of a particular request. That will be a key piece of information if the discussion returns to the Legislature.
What are they proposing?
The report’s first option is the most radical: completely repeal the CNC Act and replace entry controls with licensing, inspections, quality oversight, fraud prevention, and transparency.
The authors argue that providers who already meet rigorous federal requirements—particularly those certified to participate in Medicare—should not have to go through a second process to demonstrate that there is sufficient market “need.”
If complete repeal lacks political support, they propose significantly scaling back the system.
Among the first services they recommend exempting are behavioral health, substance use treatment, home health services, hospice, and other outpatient or community-based services, on the grounds that they represent lower-cost alternatives and serve particularly vulnerable populations.
They also propose setting fixed deadlines, raising financial thresholds, creating clear exemptions for providers that meet federal standards, and limiting the mechanisms through which competitors can prolong the processes.
Finally, they recommend a measure that should be less controversial: requiring the Department of Health to publish better data.
The report proposes disclosing annually how many applications were filed, approved, denied, withdrawn, and remain pending; how long it takes to reach a decision; how many applications are opposed by competitors; how much capital the projects represent; and what service capacity they would generate.
The question is no longer the same as it was in 1975
Half a century ago, the assumption behind the certificates was that too many beds, machines, and facilities could lead to idle capacity and drive up costs.
Puerto Rico in 2026 faces a different set of challenges. It loses hundreds of doctors annually, has a proportionally older population, faces documented shortages in primary care, dental care, and mental health care, and continues to face enormous funding disparities compared to the states.
That does not automatically prove that all entry regulations should be eliminated. It does, however, as the study argues, compel us to ask whether a model designed to prevent excess capacity remains appropriate when one of the system’s most visible problems is precisely the difficulty in securing capacity, professionals, and timely access.
That is, ultimately, the discussion that the report by the Institute for Economic Liberty and the Pacific Legal Foundation brings back to the table.
Not simply whether Puerto Rico should have a permit known as a Certificate of Need and Convenience.
But rather, who should decide when Puerto Rico needs another health care service: the government before the investment is made, or doctors, investors, insurers, and patients once the opportunity to compete to provide it arises.
This article was originally published in Spanish by El Vocero.
