The effect of certificate-of-need laws on hospital beds and healthcare expenditures: an empirical analysis

Abstract

Objective: To estimate the effect of certificate-of-need legislation on hospital bed supply and healthcare expenditures.

Study design: This study uses state data on several variables, including healthcare expenditures, hospital bed supply, and the existence of a certificate-of-need program, from 4 periods (1985, 1990, 1995, and 2000).

Methods: We estimate 2 multivariate regression equations. In the first equation, hospital bed supply is the dependent variable, and certificate of need is included as an independent variable. In the second equation, healthcare expenditures is the dependent variable, and hospital bed supply and certificate of need are included as independent variables.

Results: Certificate-of-need laws have reduced the number of hospital beds by about 10% and have reduced healthcare expenditures by almost 2%. Certificate-of-need programs did not have a direct effect on healthcare expenditures.

Conclusion: Certificate-of-need programs have limited the growth in the supply of hospital beds, and this has led to a slight reduction in the growth of healthcare expenditures.