Research Symposium

BIO

Eliza Terziev is an undergraduate Economics major with minors in mathematics, business, and PPE (Philosophy, Politics, & Economics). Terziev is also a policy research intern at FSU's DeVoe L. Moore Center and Reason Foundation focusing on housing and land use policy. She is originally from Champaign, Illinois. After graduation, Terziev plans on pursuing a PhD in Economics.

Certificate of Need Laws and Acute Care Utilization Rates: An Investigation of Kentucky & Pennsylvania

Abstract

Certificate of Need (CON) laws were mandated by the federal government in 1974 to reduce healthcare spending by limiting “supplier-induced demand.” These laws required states to establish programs that only permitted additional hospitals if hopeful providers demonstrated there was a sufficient need for their services. Counter to their goals, these laws have been associated with higher spending on health and worse medical outcomes (Conover and Bailey, 2020; Stratmann and Wille, 2016). Due to the failure of CON regulation to achieve their intended goals, the federal mandate was repealed in 1986. States could then decide whether they wanted to continue these programs. Today 35 states and Washington DC have some kind of CON law (NCSL, 2024). One of these states is Kentucky. Kentucky’s CON criteria includes a requirement that the utilization rate in a planning area is greater than 80% for a new hospital to be approved. This research seeks to investigate whether utilization rates in Kentucky are different from comparable states. Specifically, we ask: do incumbent providers leverage utilization rate requirements to keep out competitors? We investigate this by comparing utilization in CON states to non-CON states. Due to similarities in health indicators, we chose Pennsylvania for this comparison. Observing utilization data from 2016 to 2019, preliminary findings suggest utilization rates are lower in Kentucky than in Pennsylvania, despite Kentucky having worse health indicators, and fewer beds per person. This discrepancy may suggest that Kentucky healthcare providers are working within the CON legal framework to keep out potential competitors.

Keywords: Certificate of Need Laws