Evaluating the Impact of Certificate-of-Need Regulation Using Measures of Ultimate Outcome: Some Cautions from Experience in Massachusetts

Prior evaluations of certificate of need (CON) have concluded that such regulation did little to reduce the level of hospital capital investment. These studies, however, failed to examine the underlying patterns of hospital investment behavior onto which CON was imposed andfurther neglected to determine the lag period that separates the introduction of regulation and the appearance of outcomes actually attributabk to the presence of CON. This article addresses these two issues by using rate-setting data to examine the details of hospital capital investment across the whole voluntary hospital industry in one state-Massachusetts- both before and after the introduction of certificate of need. Massachusetts voluntary hospitals werefound to devote most of their capital expenditures to the construction of major new inpatientfacilities built in cycks of 14years average duration throughout the post- World War II period. The date of completion of such a facility proved to be the major determinant of a hospital's capital expenditure pattern over time, and hospitals of similar teaching status and geographic location showed considerable synchrony in the construction of such facilities. At least in Massachustetts, th