Certificate-of-Need Laws and Hospital Quality

51 Pages Posted: 12 Jul 2018

See all articles by Thomas Stratmann

Thomas Stratmann

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

David Wille

George Mason University

Date Written: 09/27/2016

Abstract

We investigate the effect of certificate-of-need (CON) laws on the quality of hospitals. As of 2015, 36 states and the District of Columbia required healthcare providers to seek approval from a state’s healthcare regulator before making any major capital expenditures. These requirements restrict entry into the healthcare market. Therefore, incumbent medical providers in states with CON laws may face fewer competitive pressures. Hospital service quality is one important margin on which hospitals compete. In this paper, we test the hypothesis that hospitals in states with CON laws provide lower-quality services than hospitals in states without CON laws. Our results do not allow us to reject the hypothesis that CON hospitals deliver lower-quality care than non-CON hospitals. Nor do our results show that hospital quality is higher in CON states. Our overall results suggest that CON regulations lead to lower-quality care for some measures of quality and have little or no effect on other measures of quality. The results are largely robust to a variety of alternative samples and quality measures.

Suggested Citation

Stratmann, Thomas and Wille, David, Certificate-of-Need Laws and Hospital Quality (09/27/2016). MERCATUS WORKING PAPER, Available at SSRN: https://ssrn.com/abstract=3211657 or http://dx.doi.org/10.2139/ssrn.3211657

Thomas Stratmann (Contact Author)

George Mason University - Buchanan Center Political Economy ( email )

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George Mason University - Mercatus Center ( email )

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HOME PAGE: http://www.mercatus.org/scholars/thomas-stratmann

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

David Wille

George Mason University ( email )

3434 Washington Blvd
4th Floor
Arlington, VA 22201
United States

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