Can Empirical Demand Models Assist in CON Comparative Reviews? A Case Study in Florida

Gary M. Fournier

Southern Economic Journal, 2014, vol. 81, issue 1, 68-90

Abstract: Certificate‐of‐Need (CON) programs for new hospital construction are intended to foster the best selection among competing hospital applications, given demands for hospital care in the community. Yet, the merits of CON depend in part on the quality of the comparative review process. This article examines a case study in Florida to illustrate the utility of empirical evaluations using patient choice models. I estimate such models to show how patients would respond to a change in hospital choices. By simulating the welfare effects of the proposed hospitals, I can further predict how prices of hospital care differ by applicant. Results suggest that empirical analysis using data on patient choice of hospitals may better inform the review process. At the same time, however, it may not give a unique ranking without additional analysis of the fixed costs of proposed services in the context of existing marketwide capacity.

Date: 2014
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https://doi.org/10.4284/0038-4038-2011.011

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Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:81:y:2014:i:1:p:68-90

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