Cross Border Effects of State Health Technology Regulation

Certificate of Need (CON) laws, state laws requiring providers to obtain licenses before adopting health-care technology, have been controversial. The effect of CON on technology supply has not been well established. In part this is because analyses have focused on state-level supply effects, which may reflect either the consequence of CON regulation on supply or the cause for its adoption or retention. Instead, we focus on the cross border effects of CON. We compare the number and location of magnetic resonance imaging providers in counties that border states with a different regulatory regime to (1) counties in the interior of states, (2) counties on state borders with the same regulatory regime on both sides, and (3) counties on borders with different regulatory regimes, but with a large river on the border. We find there are 6.4 fewer MRIs per million people in regulated counties that border counties in unregulated states than in unregulated counties that border regulated counties. This statistically significant finding that regulatory spillover can be sizable should be accounted for in future research on state-based health technology regulation. In addition, it suggests state experiences may not accurately predict the effects of CON if it were implemented nationally. © 2015 American Society of Health Economists and Massachusetts Institute of Technology