Rural Healthcare Access and Supply Constraints: a Causal Analysis

Abstract

Certificate-of-need (CON) laws require that healthcare providers receive approval from a state board before offering additional services in a given community. Proponents of CON laws claim that these laws are needed to prevent the oversupply of healthcare services in urban areas and to increase access in rural areas, which are predominantly underserved. Yet, the policy could lower rural access if used by incumbents to limit entry from competitors. We explore the repeal of these regulations in five U.S. states to offer the first estimate of the causal effects of CON laws on rural and urban healthcare access. We find that repealing CON laws causes a substantial increase in hospitals in both rural and urban areas. We also find that the repeal leads to fewer beds and smaller hospitals on average, suggesting an increase in entry and competition in both rural and urban areas.

Keywords: Healthcare Access, Rural Areas, Regulation, Certificate-of-need

JEL Classification: I11, I18, L51