Entry regulation and the effect of public reporting: Evidence from Home Health Compare

Abstract

Economic theory suggests that competition and information are complementary tools for promoting health care quality. The existing empirical literature has documented this effect only in the context of competition among existing firms. Extending this literature, we examine competition driven by the entry of new firms into the home health care industry. In particular, we use the certificate of need (CON) law as a proxy for the entry of firms to avoid potential endogeneity of entry. We find that home health agencies in non-CON states improved quality under public reporting significantly more than agencies in CON states. Because home health care is a labor-intensive and capital-light industry, the state CON law is a major barrier for new firms to enter. Our findings suggest that policymakers may jointly consider information disclosure and entry regulation to achieve better quality in home health care.

Keywords: certificate of need; competition; home health care quality; information disclosure.

Figure A1:

A Sample of Home Health Compare—Table Display Note: The comparison table is displayed after a consumer visiting the HHC website types in a ZIP/city/state. Consumers can choose quality measures of interest and select up to three HHAs for comparison at a time.

Figure A2:

A Sample of Home Health Compare—Graphical Display Note: The comparison graph is displayed after a consumer visiting the HHC website types in a ZIP/city/state. Consumers can choose quality measures of interest and select up to three HHAs for comparison at a time.

Figure A2.a:

Distribution of percentage change in the state-level number of agencies in CON and non-CON states between 2001 and 2006

Figure A2.b:

Distribution of percentage change in average zip code-level HHI in CON and non-CON states between 2001 and 2006

Figure A3:

Reported Functional Improvement by CON status, 2001–2006

Figure A4:

Unreported Functional Improvement by CON status, 2001–2006

Figure A5:

Hospitalization Rate by CON status, 2001–2006

Figure A6:

Emergency Department Visit Rate by CON status, 2001–2006

Figure 1:

Total Number of agencies in CON states and non-CON states over time.