Journal of Public Health

, Volume 27, Issue 6, pp 755–760 | Cite as

Can health spending be reined in through supply restraints? An evaluation of certificate-of-need laws

  • James BaileyEmail author
Original Article



Most US states use certificate-of-need (CON) programs in an attempt to slow the growth of health care spending. The objective of this study is to evaluate how CON in fact affects health care spending.

Subjects and methods

With 1980–2009 state-level data on spending from the National Health Expenditure Accounts, this article uses fixed-effects regressions to evaluate how the presence and scope of state CON laws affect these spending outcomes.


This article estimates that CON laws lead to a statistically significant 3.1% increase in total spending and finds that this increase is primarily driven by spending on physicians.


Rather than decreasing health care spending as intended, it appears that CON laws actually increase it. To the extent that policy makers wish to restrain health care spending, they may wish to repeal these laws.


Health care spending Certificate of need Health care supply Regulation 



Thanks to Eleanor Lewin, Michael Kotrous, Anna Chorniy, Mohamad Elbarasse, Matt Mitchell, Tom Hamami, Harry David, participants in the Creighton Business Economic Environment and Policy seminar, the Association of Private Enterprise Education and the American Society of Health Economists 2016 meetings and the International Health Economics Association 2017 for helpful comments. Thanks to the Mercatus Center for financial support and helpful comments.

Compliance with ethical standards

Conflicts of interest

The authors have no conflicts of interest to declare.


  1. Auster R, Oaxaca R (1981) Identification of supplier induced demand in the health care sector. J Hum Resour 16:327–342CrossRefGoogle Scholar
  2. Bailey J (2018) The effect of certificate-of-need laws on all-cause mortality. Health Serv Res 53:49–62CrossRefGoogle Scholar
  3. Bailey J, Hamami T, McCorry D (2017) Certificate of need laws and health care prices. J Health Care Finance 43(4):1–7Google Scholar
  4. Conover C, Sloan F (1998) Does removing certificate-of-need regulations lead to a surge in health care spending? J Health Polit Policy Law 23:455–481CrossRefGoogle Scholar
  5. Cutler D, Huckman RS, Kolstad JT (2010) Input constraints and the efficiency of entry: lessons from cardiac surgery. Am Econ J: Econ Policy 2:51–76. CrossRefGoogle Scholar
  6. DeLia D, Cantor JC, Tiedemann A, Huang CS (2009) Effects of regulation and competition on health care disparities: the case of cardiac angiography in New Jersey. J Health Polit Policy Law 34:63–91CrossRefGoogle Scholar
  7. Ford JM, Kaserman DL (1993) Certificate-of-need regulation and entry: evidence from the dialysis industry. South Econ J 59:783–791CrossRefGoogle Scholar
  8. Grabowski DC, Ohsfeldt RL, Morrisey MA (2003) The effects of CON repeal on Medicaid nursing home and long-term care expenditures. Inquiry 40:146–157CrossRefGoogle Scholar
  9. Hellinger F (2009) The effect of certificate-of-need laws on hospital beds and health-care expenditures: an empirical analysis. Am J Managed Care 15:737–744Google Scholar
  10. Ho V (2006) Does certificate of need affect cardiac outcomes and costs? Int J Health Care Finance Econ 6:300–324. CrossRefPubMedGoogle Scholar
  11. Koopman C, Philpot A (2016) The state of certificate-of-need laws in 2016. Mercatus Center at George Mason University, Arlington, VA. Accessed 10/17/18
  12. Lanning J, Morrisey M, Ohsfeldt R (1991) Endogenous hospital regulation and its effects on hospital and non-hospital expenditures. J Regul Econ 3:137–154CrossRefGoogle Scholar
  13. Mitchell M (2016) Do certificate-of-need laws limit spending? Mercatus Working Paper, Mercatus Center at George Mason University, Arlington, VA. Accessed 10/17/18
  14. Rahman M, Galarraga O, Zinn JS, Grabowski DC, Mor V (2016) The impact of certificate-of-need laws on nursing home and home health care expenditures. Med Care Res Review 73:85–105. CrossRefGoogle Scholar
  15. Reinhardt HL, Reinhardt HN, Reinhardt UE (1987) Lessons for hospital payment from ornithology. J Policy Anal Manage 6:449–450CrossRefGoogle Scholar
  16. Rivers PA, Fottler MD, Frimpong JA (2010) The effects of certificate-of-need regulation on hospital costs. J Health Care Finance 36:1–16Google Scholar
  17. Shortell SM, Hughes EFX (1988) The effects of regulation, competition, and ownership on mortality rates among hospital inpatients. N Engl J Med 318:1100–1107CrossRefGoogle Scholar
  18. Stratmann T, Russ J (2014) Do certificate-of-need laws increase indigent care? Mercatus working paper. Mercatus Center at George Mason University, ArlingtonGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Providence CollegeProvidenceUSA

Personalised recommendations