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Are Certificate-of-Need Laws Barriers to Entry? How They Affect Access to MRI, CT, and PET Scans January 12, 2016

By Thomas Stratmann and Matthew C. Baker.

Mercatus Center, January 2016 

Abstract Certificate of need (CON) laws in 21 states restrict acquisition of imaging equipment, including magnetic resonance imaging (MRI), computed tomography (CT), and positron emission tomography (PET) scans. We compare the effect of CON regulations for imaging services provided by hospitals and other providers to determine whether CON laws affect use of imaging services across provider types. We find that services by nonhospital providers, but not by hospital providers, are negatively associated with CON laws. We also find that CON laws reduce the overall number of medical providers, suggesting less availability of imaging services in CON states. We provide evidence consistent with this result showing that residents of CON states are more likely to travel out of state to obtain imaging services than are residents of non-CON states. These results imply that the effect of CON is heterogeneous on hospitals and nonhospitals, affecting the market structure for imaging services.

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