The Impact of Deregulation on Long-Term Acute Care Hospitals: Evidence from Certificate-of-Need Repeals

Demographic shifts are making healthcare access increasingly crucial for the elderly, but regulatory barriers, such as certificate-of-need (CON) laws, prevent the entry of new providers. This study examines the impact of the repeal of CON laws in 10 states on access to long-term acute care hospitals (LTACs). Using staggered difference-in-difference estimators, we show that repealing CON laws causes an increase of 6.3 LTACs per million elderly, or approximately 69 percent, relative to the sample mean. In contrast to existing research, which finds that LTACs are primarily cost-increasing institutions, we find that the entry of LTACs into nursing home markets leads to reduced hospitalization rates and to reduced falls in skilled nursing facilities, indicating that LTACs serve an important role in long-term care markets.