This quantitative study investigates the effect of certificate-of-need (CON) regulation on the quality of care in the nursing home industry. It uses county-level demographic data from the 48 contiguous US states that are extracted from the American Community Survey (ACS) and cover the years 2012, 2013, and 2014. In doing so, it employs a new set of service quality variables captured from a variety of county-level data sources. Instrumental variables results indicate that health survey scores for nursing homes that are computed by healthcare professionals are about 18-24% lower, depending on the type of nursing home under consideration, in states with CON regulation. We also find that the presence of CON regulation leads to a substitution of lower-quality certified nursing assistant care for higher-quality licensed practical nurse care, regardless of the type of nursing home under consideration.
Keywords: certificate-of-need regulation; health economics; nursing homes; service quality; theory of economic regulation.