Association for Public Policy Analysis & Management

The market for most health care services is heavily regulated in the United States. In the 1970s after the inception of Medicare and Medicaid most states adopted Certificate of Need (CON) laws to require hospitals and other institutions to establish the “need” for more beds or expansions of service lines. While some states have abandoned CON altogether, others have pursued a partial deregulatory measure of allowing for a tradable market in long-term care (LTC) beds. We study the effects of such a program in the State of Ohio. We find that a market for LTC beds: 1) improves the distribution of beds statewide; 2) likely leads to movement of beds from high-Medicaid facilities to low Medicaid facilities; 3) is unlikely to result in infrastructure investments or quality improvements for selling facilities; and 4) should be structured to encompass the largest geographic unit (ideally the entire state) rather than smaller geographic sub-units.