Certificate‐of‐need regulation and the diffusion of innovations: A random coefficient model

Abstract

Abstract In this paper, we examine empirically the effect that certificate‐of‐need regulation by state health planning organizations has had on the speed of diffusion of a relatively new medical technology—haemodialysis. Specifically, we test the hypothesis that a requirement that investments be subject to certificate‐of‐need review has significantly slowed the rate of adoption of this particular treatment modality. In subjecting this hypothesis to empirical verification, we estimate a random coefficient model. This approach allows us to make more efficient use of the available data than the traditional two‐stage approach to modelling diffusion processes wherein separate logistic functions are first estimated over the time series observations followed by hypothesis tests conducted over the cross‐sectional observations. We find evidence that certificate‐of‐need regulation slows the spread of haemodialysis technology.

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