Certificate of Need Regulation in the Nursing Home Industry: Has it Outlived its Usefulness?

Posted: 20 Jun 2007

See all articles by Barbara Caldwell

Barbara Caldwell

Saint Leo University - Donald R. Tapia School of Business

Gabriel Picone

Department of Economics


The primary goals of the National Health Planning and Resources Development Act (P.L. 93-641) of 1974 were to (1) contain health care costs and (2) increase the accessibility and quality of health services. Certificate of need (CON) regulation and construction moratoria in the nursing home industry are an attempt to constrain health care costs by limiting the supply of nursing home beds. This type of regulation imposes a supply side constraint that creates a potential barrier to entry and in the presence of excess demand may cause a shortage of nursing home beds for those residents covered by Medicaid.Even though the Federal CON requirement lapsed in 1986, forty-two States and the District of Columbia continue to have a CON, a construction moratorium, or both for nursing home facilities. Yet maintaining these regulations comes with a cost.

This paper investigates if differences exist in the quality of care and the access to care between nursing homes in those States without CON and/or construction moratorium and those States that still have such policies. Using data for the years 1991 through 2003 for all freestanding Medicaid-/Medicare-certified nursing home facilities in the United States and employing state and facility fixed effects models we find that Medicaid-eligible residents in those states without CON and/or construction moratorium policies have more access to a nursing home bed than those individuals in states with these policies. With respect to quality of care the results are mixed depending on the measure of quality that is employed. With the risk of becoming a nursing home resident at the age of 65 at 44 percent and at the age of 85 at 53 percent (Spillman and Lubitz 2002) coupled with the aging of the current population, the areas of quality of care and access to care remain important policy issues in the nursing home industry.

Keywords: access, quality, excess demand, reimbursement, Medicaid

JEL Classification: I11, I18

Suggested Citation

Caldwell, Barbara J and Picone, Gabriel, Certificate of Need Regulation in the Nursing Home Industry: Has it Outlived its Usefulness?. iHEA 2007 6th World Congress: Explorations in Health Economics Paper. Available at SSRN: https://ssrn.com/abstract=993256

Barbara J Caldwell (Contact Author)

Saint Leo University - Donald R. Tapia School of Business ( email )

University Campus - MC2011
Post Office Box 6665
Saint Leo, FL 33574-6665
United States
352-588-7393 (Phone)

Gabriel Picone

Department of Economics ( email )

4202 E. Fowler Avenue
Tampa, FL 33620-5500
United States
813-974-6537 (Phone)
813-974-6510 (Fax)

HOME PAGE: http://www.coba.usf.edu/departments/economics/facu

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