State Regulation and Hospital Costs
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abstract
The effects of various regulations on hospital costs are estimated using a two decade long panel data set which spans the initiation, and in some instances the repeal, of various forms of hospital regulation. The long panel fosters two improvements over previous research. First, as state hos- pital cost levels may affect states' incentive to regulate, fixed effect estimators alleviate omitted variable bias derived from the states' regulatory discretion. Second, the long panel per- mits the estimation of many different regulatory program effects, but also facilitates the analysis of potential regulatory program interaction. The empirical results suggest that previ- ous studies have exaggerated regulatory cost savings: although some interaction effects are indicated, hospital costs appear unresponsive to most regulatory programs.
