The effect of certificate-of-need legislation on hospital investment.

There is presently an intense interest among third-party payers of health care, law-makers, and the public in the capital expenditures of health health care facilities caused by the large increases in hospital and health care costs registered during the post Medicare period.

Abstract

There is presently an intense interest among third-party payers of health care, law-makers, and the public in the capital expenditures of health care facilities.1 This interest has been engendered by the large increases in hospital and health care costs registered during the post Medicare period, and by the prevailing convic? tion among health care researchers that excess capacity has contributed to this cost spiral. In? vestment in plant and equipment by health care facilities increases operating costs both through higher interest and depreciation expenses and the associated operating expenses. The addi? tion of a wing to a hospital will necessitate the employment of more nurses, maintenance per? sonnel, and housekeepers, and the acquisition of new equipment. New equipment will increase operating costs by the amount of the deprecia? tion expense plus the cost of training and em? ploying personnel to operate and repair it. The Hill-Burton program, passed in 1946, provided Federal funds for the construction of health care facilities that received the approval of a state planning agency. The 1966 Amend? ments to the Public Health Act created state