DOES REMOVING CERTIFICATE-OF-NEED REGULATIONS LEAD TO A SURGE IN HEALTH-CARE SPENDING

This study assesses the impact of certificate-of-need (CON) regulation for hospitals on various measures of health spending per capita, hosp ital supply, diffusion of technology, and hospital industry organizati on. Using a time series cross-sectional methodology, we estimate the n et impact of CON policies on costs, supply, technology diffusion, and industry organization, controlling for area characteristics, the prese nce of other forms of regulation, such as hospital rate-setting, and c ompetition. Mature CON programs are associated with a modest (5 percen t) long-term reduction in acute care spending per capita, but not with a significant reduction in total per capita spending. There is no evi dence of a surge in acquisition of facilities or in costs following re moval of CON regulations. Mature CON programs also result in a slight (2 percent) reduction in bed supply but higher costs per day and per a dmission, along with higher hospital profits. CON regulations generall y have no detectable effect on diffusion of various hospital-based tec hnologies. It is doubtful that CON regulations have had much effect on quality of care, positive or negative. Such regulations may have impr oved access, but there is little empirical evidence to document this.