by Thomas Stratmann, Jacob W. Russ
July 17, 2014
Working Paper Series
Thirty six states and the District of Columbia have certificate-of-need (CON) regulations, which prohibit hospitals and other health care providers from offering new services without approval from regulators. The intent was to reduce health care costs by keeping providers from over-investing in facilities and equipment. Yet, by preventing new medical providers from competing with existing hospitals, CON laws likely make medical care more expensive. States with CON laws have far fewer hospital beds and less medical equipment than states without them, and there is no evidence that they improve health care access for the needy. While the goal of improving access to healthcare for the needy is noble, interventions like certificate-of-need laws should require more evidence from regulators prior to restricting competition in health care markets. Indigent care is not a well-defined concept and doesn’t lend itself to transparent accounting. Using the best measure available, uncompensated care, these restrictions do not appear improve the poor’s access to healthcare.