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The Consequences of Public Utility Regulation of Hospitals

Noll, Roger G. (1974) The Consequences of Public Utility Regulation of Hospitals. Social Science Working Paper, 63. California Institute of Technology , Pasadena, CA.

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The health care delivery system is among the most extensively regulated sectors of the American economy. Professional licensure, hospital accreditation and certification, qualification requirements for federal subsidies, and governmental oversight of the third-party payer system constitute a complex set of institutional constraints on the structure and performance of the hospital industry [see Somers]. Beginning about a decade ago, serious demands have been made—notably by some of the trade associations and professional societies in the industry—to complete the circle of regulation by establishing administrative agencies, at either the state or federal level, to subject the industry to "public utility" regulation. These pressures have yielded results: most states have either established hospital regulation, or are considering legislation that would accomplish that end. The purpose of this paper is to explore the causes and likely consequences of hospital regulation. Its point of departure is not the actual operation of the health care delivery system in the United States. Instead, the starting point is a growing body of literature in economics, law and political science on the operation and performance of regulation generally. The first section presents some general observations on the factors that cause regulatory agencies to be established and that influence the outcomes of regulatory procedures. The second section describes some of the problems that seem to recur in regulated industries, and why these are probably inevitable consequences of imposing regulation. The third section applies these general theoretical and empirical observations to the specific case of the medical care delivery system and offers some conclusions about the relative merits of alternative methods of government intervention in the industry.

Item Type:Report or Paper (Working Paper)
Additional Information:I am indebted to Ralph Berry, Clark Havighurst, Michael Levine and Jeffrey Weiss for helpful comments on an earlier draft. Part of the costs of preparing this manuscript were financed by the National Science Foundation, grant # DA-39495. Published in Controls on Health Care, Institute of Medicine, National Academy of Sciences, Washington, D. C., 1975. In Government Policies and Technological Innovation, National Technical Information Service. National Science Foundation, Washington, D.C. 20550. Vol. III, p. 20-40, Research and Policy Studies, PB244573, 1974.
Group:Social Science Working Papers
Funding AgencyGrant Number
Series Name:Social Science Working Paper
Issue or Number:63
Record Number:CaltechAUTHORS:20171101-133242548
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82838
Deposited By: Jacquelyn Bussone
Deposited On:02 Nov 2017 19:46
Last Modified:03 Oct 2019 18:59

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