Does certificate of need really contain hospital costs in the United States?

Abstract

Objective This study examines the impact of certificate of need (CON) regulation on hospital costs.Design A modified structure—conduct—performance paradigm was applied to a national sample of US hospitals in order to investigate the impact of CON regulation on hospital costs.Methods Secondary data for 1957 US acute care hospitals in 301 standard metropolitan statistical areas (SMSAs) from the American Hospital Association's Annual Survey of Hospitals in 1991 were used. The dependent variable was hospital costs per adjusted admission in 1991. Predictor variables were the existence of a CON law in each hospital's state and the dollar limit (if any) required for CON approval. Control variables were environmental, market, and institutional characteristics. Associations between predictor and dependent variables were investigated using multiple regression analyses.Results The results indicate that CON laws had a positive, statistically significant relationship to hospital costs per adjusted admission. Conclusion These findings suggest not only that CON do not really contain hospital costs, but may actually increase them by reducing competition. Implications for public policy are discussed.