Abstract:
Both federal and state governments have responded to the rapid rise in expenditures on hospital care by implementing a variety of regulatory approaches. These programs fall into three categories. Rate and revenue regulation dictates the terms according to which private and public insurers pay the hospital. Facilities and services regulation in- volves control over entry of hospitals, invest- ment in beds, major equipment, and expan- sion of special services. Utilization review, not discussed here, focusses on the quantity and quality of care hospitals provide. A sub- stantial body of empirical evidence has accu- mulated on effects of each type of program. Based on a brief review of recent economic research, this paper assesses the promise of the first two types of regulatory mechanisms for controlling hospital costs.
