Certificate-of-need laws and substance use treatment

Abstract

Certificate of Need (CON) laws in place in most US states require health care providers to prove to a state board that their proposed services are necessary in order to be allowed to open or expand. While CON most commonly targets hospital and nursing home beds, data from the American Health Planning Association show that some states require CON for up to 28 separate types of health care providers and services. In the face of a national opioid epidemic, 17 states retain CON specifically for substance abuse treatment, requiring substance abuse providers to prove their ‘economic necessity’ before opening or expanding. In contrast to the extensive academic literature on how hospital and nursing home CON affect costs and access, substance abuse CON is essentially unstudied. We aim to change this. Using data on CON from the American Health Planning Association together with 2002-2016 data on substance use treatment facilities from the Substance Abuse and Mental Health Services Administration’s National Survey of Substance Abuse Treatment Services, we measure the effect of CON on access to substance use treatment. Using fixed effects analysis of states enacting and repealing substance abuse CON, we measure how CON affects the number of substance abuse facilities and beds per capita in a state. In addition, we measure the effect of CON on the forms of payment that treatment facilities accept, with large shares of cash-only facilities serving as a proxy for excess demand.

Keywords: Certificate of Need, CON, Substance Use Treatment

JEL Classification: I18