Do Certificate-of-Need Laws Limit Spending?

Mitchell, Matthew D.

doi:10.2139/ssrn.2871325

Cited by 7 publications

(12 citation statements)

References 21 publications

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“…7 Research has shown that CON laws do not restrain spending. If anything, the regulations seem to raise spending per service as well as per patient (Noether 1988;Mitchell 2016;Bailey 2019). The evidence on quality has been more mixed (Vaughan-Sarrazin et al 2002;Lorch et al 2012) but recent papers that assess quality through multiple metrics and attempt to control for spurious causation conclude that CON laws do not enhance and likely undermine quality of care (Stratmann and Wille 2016;Ohsfeldt and Li 2018;Bailey 2018;Fayissa et al 2020;Ghosh et al 2020;Chiu 2021;Baker and Stratmann 2021).…”

Section: Certificate-of-needmentioning

confidence: 99%

The Economics of a Bed Shortage: Certificate-of-Need Regulation and Hospital Bed Utilization during the COVID-19 Pandemic

Mitchell

Stratmann

2021

JRFM

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Certificate-of-need (CON) laws are intended to restrain health care spending by limiting the acquisition of duplicative capital and the initiation of unnecessary services. Critics contend that need is difficult to objectively assess, especially considering the risks and uncertainty inherent in health care. We compare statewide bed utilization rates and hospital-level bed utilization rates in bed CON and non-bed CON states during the COVID-19 pandemic. Controlling for other possibly confounding factors, we find that states with bed CONs had 12 percent higher bed utilization rates and 58 percent more days in which more than 70 percent of their beds were used. Individual hospitals in bed CON states were 27 percent more likely to utilize all of their beds. States that relaxed CON requirements to make it easier for hospitals to meet the surge in demand did not experience any statistically significant decreases in bed utilization or number of days above 70 percent of capacity. Nor were hospitals in states that relaxed their CON requirements any less likely to use all their beds. Certificate-of-need laws seem to have exacerbated the risk of running out of beds during the COVID-19 pandemic. State efforts to relax these rules had little immediate effect on reducing this risk.

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Section: Certificate-of-needmentioning

confidence: 99%

The Economics of a Bed Shortage: Certificate-of-Need Regulation and Hospital Bed Utilization during the COVID-19 Pandemic

Mitchell

Stratmann

2021

JRFM

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“…Conversely, the lifting of CON regulation was not associated with an acceleration in the cost increase or the spread of new medical technology. These results have been largely confirmed (see Mitchell, 2016, for a review).…”

Section: Is the Strict Public Regulation Of The Health Care Sector Ju...mentioning

confidence: 67%

Health economics explained through six questions and answers

Zweifel

2022

Economic Affairs

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Health economics as a discipline is described using six questions to be answered: Is health different from all other goods? Is the ‘cost explosion’ the core issue? What is the relative importance of moral hazard and adverse selection in competitive health insurance? What is the relevance of supplier‐induced demand? For evaluation, is cost effectiveness the appropriate standard? And finally, can the the very high degree of regulation in health care be justified on economic grounds? While the answers are soundly grounded in microeconomic theory, they show that economists interested in health and health care are far from the caricature of penny‐pinching ‘Elephants in a porcelain shop’ (Gbadebo & Reinhardt, 2001).

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“…CON laws reduce competition by requiring health-care providers to obtain the permission of a state board before opening or expanding to certify that their new facility is "economically necessary," with the goal of reducing health-care spending (Bailey 2018a). Reviewing this literature, Mitchell (2016) found one study arguing that CON reduces spending, while "Of the remaining 11 studies that assess the effect of CON on expenditures, 7 found evidence that CON increases expenditures, 2 found no statistically significant effect, and 2 found that CON increased some expenditures while reducing others." Theory can help us understand why empirical results differ.…”

Section: Introductionmentioning

confidence: 99%

“…Theory can help us understand why empirical results differ. But the literature on CON and spending has been almost completely atheoretical, apart from graphical supply-and-demand models in Mitchell (2016) and Bailey (2018b). In this paper, we put forward a theoretical model of how health-care market concentration affects total spending.…”

Section: Introductionmentioning

confidence: 99%

“…This result is simply a formalization of the graphical intuition fromMitchell (2016) andBailey (2018b).2 We drop the nonnegativity constraint on consumption of the composite good, which effectively allows the consumer to take on debt to pay for his medical expenses. It would be functionally equivalent to assume that Y is sufficiently high to cover the medical expenses of the sickest possible consumer.…”

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confidence: 99%

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Competition and Health-Care Spending: Theory and Application to Certificate of Need Laws

Bailey¹,

Hamami²

2019

Working Paper (Federal Reserve Bank of Philadelphia)

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Hospitals and other health-care providers in 34 states must obtain a Certificate of Need (CON) from a state board before opening or expanding, leading to reduced competition. We develop a theoretical model of how market concentration affects health-care spending. Our theoretical model shows that increases in concentration, such as those brought about by CON, can either increase or decrease spending. Our model predicts that CON is more likely to increase spending in markets in which costs are low and patients are sicker. We test our model using spending data from the Household Component of the Medical Expenditure Panel Survey (MEPS).

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Do Certificate-of-Need Laws Limit Spending?

Cited by 7 publications

References 21 publications

The Economics of a Bed Shortage: Certificate-of-Need Regulation and Hospital Bed Utilization during the COVID-19 Pandemic

The Economics of a Bed Shortage: Certificate-of-Need Regulation and Hospital Bed Utilization during the COVID-19 Pandemic

Health economics explained through six questions and answers

Competition and Health-Care Spending: Theory and Application to Certificate of Need Laws

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