Rural Healthcare Access and Supply Constraints: A Causal Analysis

TL;DR

This paper investigates the causal impact of Certificate-of-Need laws on healthcare access in rural and urban areas, revealing that repealing these laws increases hospital numbers but decreases beds and hospital size, indicating heightened competition.

Contribution

It provides the first causal estimates of CON law repeal effects on healthcare infrastructure in rural and urban settings, highlighting increased hospital entry and competition.

Findings

Repeal of CON laws increases hospital numbers in rural and urban areas.

Hospital beds decrease and hospitals become smaller after repeal.

CON law repeal promotes competition and entry in healthcare markets.

Abstract

Certificate-of-need (CON) laws require that healthcare providers receive approval from a state board before offering additional services in a given community. Proponents of CON laws claim that these laws are needed to prevent the oversupply of healthcare services in urban areas and to increase access in rural areas, which are predominantly underserved. Yet, the policy could lower rural access if used by incumbents to limit entry from competitors. We explore the repeal of these regulations in five U.S. states to offer the first estimate of the causal effects of CON laws on rural and urban healthcare access. We find that repealing CON laws causes a substantial increase in hospitals in both rural and urban areas. We also find that the repeal leads to fewer beds and smaller hospitals on average, suggesting an increase in entry and competition in both rural and urban areas.