A Study of the Effects of Certificate of Need Law on Inpatient Occupancy Rates
Economics, Finance and Quantitative Analysis
Increasing healthcare costs and the deterioration of healthcare quality have always been major concerns to policy makers in the United States, and Certificate of Need (CON) law has been implemented as one way to curb wasteful healthcare resource use. From a theoretical standpoint, CON can lead to a reduction in the number of beds as well as in the number of inpatient days (possibly by shortening the length of patient stay). However, these two effects impact inpatient occupancy rate in opposite directions. We test empirically to find out which of these two effects dominate. In this study, we investigate the impact of CON and its stringency (which is different across states with CON laws) on the inpatient occupancy rate using panel data, and we find that, on average, CON legislation reduces occupancy rate in inpatient units. Our tests evaluating CON and its features for endogeneity fail to obtain statistical support.
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