Barriers to Entry in the Healthcare Markets: Winners and Losers from Certificate-of-Need Laws

54 Pages Posted: 3 Oct 2017

See all articles by Thomas Stratmann

Thomas Stratmann

George Mason University - Buchanan Center Political Economy; CESifo (Center for Economic Studies and Ifo Institute)

Matthew Baker

George Mason University - Mercatus Center, Students

Multiple version iconThere are 2 versions of this paper

Date Written: August 29, 2017

Abstract

Certificate-of-need (CON) laws in 21 states restrict medical providers from acquiring imaging equipment, including magnetic resonance imaging (MRI), computed tomography (CT), and positron emission tomography (PET) scanners. Using difference-in-difference methods to control for state invariant characteristics, we test the effect of those restrictions on incumbent hospitals and entry into the imaging market. We find that states with CON laws demonstrate less market entry and lower market penetration of nonhospital and new hospital providers than do states that do not have those laws. Further, hospitals that opened before the implementation of a CON law face less competition in CON states than in non-CON states. We also study the effect of CON laws on consumers, which we measure as patient access to imaging services. We find that residents in CON states are more likely to travel outside their home county to obtain imaging services than are their counterparts in non-CON states.

Keywords: barriers to entry, certificate-of-need laws, medical imaging services, health care, healthcare, Medicare, regulation

JEL Classification: I180

Suggested Citation

Stratmann, Thomas and Baker, Matthew, Barriers to Entry in the Healthcare Markets: Winners and Losers from Certificate-of-Need Laws (August 29, 2017). Mercatus Research Paper. Available at SSRN: https://ssrn.com/abstract=3046812 or http://dx.doi.org/10.2139/ssrn.3046812

Thomas Stratmann (Contact Author)

George Mason University - Buchanan Center Political Economy ( email )

4400 University Drive
Fairfax, VA 22030
United States
703-993-2330 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Matthew Baker

George Mason University - Mercatus Center, Students ( email )

Arlington, VA
United States

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