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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, Matthew C. Baker

Many states require providers to seek government approval for new facilities.

stethoscope and insurance docs

Many states require providers to seek government approval for new facilities. These certificate-of-need (CON) laws restrict healthcare institutions from expanding, offering a new service, or purchasing certain pieces of equipment without first gaining approval from regulators. Twenty-one states restrict acquisition of imaging equipment such as MRI, CT, and PET scans.

A new study for the Mercatus Center at George Mason University compares how CON regulations affect imaging services provided by hospitals and imaging services offered by other providers. The results show that CON regulations adversely affect nonhospital providers, while hospitals largely remain unscathed. Residents of CON states are also more likely to travel out of state to obtain imaging services than residents of non-CON states. CON regulations can change the market for imaging services by setting up barriers to entry for providers that are not hospitals, consequently harming consumers of these services.

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Health Care