Factors that May Explain Interstate Differences in Certificate-of-Need Decisions

A major difficulty in conducting studies of the impact of certificate-of-need programs is in accounting for interstate differences in program characteristics. This paper addresses this problem by examining the empirical relationship between various characteristics of certificate-of-need programs and program decisions, measured in terms of the approvals of hospital capital projects. Aggregate data on capital expenditure approvals and net bed change approvals for 28 States are correlated with an index of each State's regulatory characteristics that was developed in an earlier study. In addition, a multivariate model of certificate-of-need approvals is estimated in which certain measures associated with the need for hospital capital in a State are introduced, along with the indices of regulatory characteristics, to explain interstate differences in regulatory characteristics, to explain interstate differences in program decisions. The results of this analysis indicate that although regulatory characteristics are significantly correlated with the relative number of new beds approved, they have little correlation with total capital expenditure approvals. Moreover, variables reflecting the need for new hospital capital in a State, such as past population growth and existing hospital capacity, appear to be more important than regulatory characteristics in explaining the relative amount of capital approvals.