Certificate of Need and the Price Paid for Inpatient Services for Privately Insured Patients
William S. Custer, Ph.D., Robinson College of BusinessPatricia Ketsche, Ph.D., Robinson College of BusinessMei Zhou, MS, Georgia Health Policy CenterDawuud Ujamaa, MS, Georgia Health Policy Center
This research was supported by funding from the Department of Community Health and the Georgia Commission on the Efficacy of the
Certificate of Need Program.
Why study CON……AGAIN?
Extensive literature that indicates that CON affects markets but has little or no effect on hospital costs and does not slow health care cost inflation: Salkever and Bice (1976, 1979) Sloan and Steinwald (1980); Sloan (1981) Joskow (1981) Farley and Kelly (1985) Sherman (1988) Conover and Sloan (1998)
Evidence Is Not Widely Accepted
States with recent / current CON study groups or commissions
Georgia Maryland Michigan Missouri North Carolina Illinois Washington
Commissions presented with non-peer reviewed studies suggesting that CON controls / reduces cost Often commissioned by
hospitals and hospital associations
Policymakers weigh prior peer reviewed studies equally with consultant reports and anecdotal evidence
Georgia Commission Asked:
Does CON restrict the supply of services? Does CON affect consumer costs? Does CON affect the quality of health care
services? Does CON affect hospitals’ abilities to
provide care to the uninsured?
Research Methods
Compared Georgia to 10 other states with varying degrees of CON rigor. Surveyed states and found 3 non-CON states 4 states with less rigorous CON programs 3 states with comparable CON programs
Used hospital discharge data to define markets using patient flows
Market Structure
Hospital Competitiveness - HHI Most markets above FTC guidelines for
competitive markets Markets in general have become less competitive No association between change in
competitiveness and CON Tier 2 CON states are significantly associated
with less competitive markets
Data / Methods Study of prices paid by private patients
If there are economies of scale/ scope, CON could lower production costs
If CON restricts competition incumbent providers could raise prices to private payers Assume public payments are unrelated to CON
MedStat private inpatient claims data for 2 years
Estimated reduce form price equation (fixed effects)
Findings CON is associated with higher inpatient
prices for privately insured patients The effect is robust with respect to:
Diagnosis and procedure Specification of CON as binary or ranked by rigor
Effect of CON on inpatient costs is smaller in rural areas
The number of Ambulatory Surgery Centers per capita is associated with higher utilization rates and higher inpatient prices
Other Findings
CON has no measurable effect of hospital quality
CON has no measurable effect on access for the uninsured However, in CON markets the ambulatory care
sensitive (ACS) admissions for the uninsured were higher
Implications of the Findings
If CON reduces production costs, privately insured consumers do not benefit
CON could reduce the need to explicitly subsidize providers through taxes and provider payments CON and Medicaid reimbursement may not be
independent
Arguments Made by Stakeholders
Argument 1: Hospitals require CON to ensure access We do not see higher admission rates per
uninsured We do not see evidence of improved primary care
access for the uninsured Argument 2: Hospitals require CON to
ensure quality We see no association between quality outcomes
and CON
Conclusion
Additional (recent) peer reviewed research is needed to inform the ongoing debate. Findings suggest the need for broader analysis of
the distributional effect of CON on health care costs
Importance of translational work to make the entire body of research accessible and useful to policymakers.
Certificate of Need and the Price Paid for Inpatient Services for Privately Insured Patients
William S. Custer, Ph.D., Robinson College of BusinessPatricia Ketsche, Ph.D., Robinson College of BusinessMei Zhou, MS, Georgia Health Policy CenterDawuud Ujamaa, MS, Georgia Health Policy Center
This research was supported by funding from the Department of Community Health as part as part of a larger analysis of the effect of
CON in Georgia on cost, quality, and access.