Entry Regulation and the Effect of Public Reporting : Evidence from Home Health Compare

Economic theory suggests that competition and information are complementary tools for promoting healthcare quality. The existing empirical literature has documented this effect only in the context of competition among existing firms. Extending this literature, we examine competition driven by the entry of new firms into the home health care industry. In particular, we use the Certificate of Need (CON) law as a proxy for the entry of firms to avoid potential endogeneity of entry. We find that home health agencies in non-CON states improved quality under public reporting significantly more than agencies in CON states. Since home health care is a labor-intensive, capital-light industry, the state CON law is a major barrier for new firms to enter. Our findings suggest that policymakers may jointly consider information disclosure and entry regulation to achieve better quality in home health care