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Does certificate of need law enhance competition in inpatient care market? An empirical analysis

Published online by Cambridge University Press:  29 June 2017

Jomon A. Paul ,
Huan Ni  and
Aniruddha Bagchi
Jomon A. Paul*
Affiliation:
Department of Economics, Finance, & Quantitative Analysis, Kennesaw State University, Kennesaw, GA, USA
Huan Ni
Affiliation:
Department of Economics, Finance, & Quantitative Analysis, Kennesaw State University, Kennesaw, GA, USA
Aniruddha Bagchi
Affiliation:
Department of Economics, Finance, & Quantitative Analysis, Kennesaw State University, Kennesaw, GA, USA
*
*Correspondence to: Jomon A. Paul, Department of Economics, Finance, & Quantitative Analysis, Kennesaw State University, 560 Parliament Garden Way, Kennesaw, GA 30144, USA. Email: jpaul17@kennesaw.edu
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Abstract

This article investigates the impact of Certificate of Need (CON) laws on competition in the inpatient care market. One of the major criticisms of these laws is that it may hinder competition in the health care market, which can lead to higher prices. However, from a theoretical standpoint, CON laws could also promote competition by limiting excessive expansion from incumbents. Our main conclusion is that CON laws by and large enhanced competition in the inpatient market during the period of our study. This indicates that the effects of CON laws to hinder predatory behavior could dominate its effects of preventing new entrants into the inpatient care market. We do not find statistically significant evidence to reject the exogeneity assumption of either CON laws or their stringency in our study. We also find factors such as proportion of population aged 18–44, proportion of Asian American population, obesity rate, political environment, etc., in a state significantly impact competition. Our findings could shed some light to public policy makers when deciding the appropriate health programs or legislative framework to promote health care market competition and thereby facilitate quality health care.

Type
Articles
Information
Health Economics, Policy and Law , Volume 14 , Issue 3 , July 2019 , pp. 400 - 420
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© Cambridge University Press 2017 

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