Certificate Of Need

AAA

DEFINITION of 'Certificate Of Need'

An endorsement required by numerous states before the construction of a new health care facility will be approved. The central idea of Certificate of Need legislation is the assertion that overbuilding and redundancy in health care facilities leads to higher health care costs. Thus to ensure that a new hospital or nursing home is necessary, a state authority conducts a study to determine whether the local demand is sufficient to allow for the construction of a new facility.

INVESTOPEDIA EXPLAINS 'Certificate Of Need'

Certificate of Need programs have been controversial since their introduction in 1964. Advocates of the programs believe that health care is not a regular economic good and cannot be left to free market. Opponents challenge the assertion that unrestrained construction would lead to higher health care prices. To the contrary, opponents argue that preventing new construction acts as a barrier to competition and keeps prices high.



RELATED TERMS
  1. Equilibrium

    The state in which market supply and demand balance each other ...
  2. Market Failure

    An economic term that encompasses a situation where, in any given ...
  3. Healthcare Sector

    A category of stocks relating to medical and healthcare goods ...
  4. Normal Good

    An economic term used to describe the quantity demanded for a ...
  5. Market Distortion

    An economic scenario that occurs when there is an intervention ...
  6. Credentialing Liability

    Liabilities that a hospital or medical facility faces for the ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Home & Auto

    Fighting The High Costs Of Healthcare

    If your employer is cutting medical benefits, a health savings account may be right for you.
  2. Fundamental Analysis

    Evaluating Pharmaceutical Companies

    Learn how to find a healthy pharmaceutical investment in a market full of weak drugs.
  3. Insurance

    What Does Medicare Cover?

    Don't assume you're insured. Find out what you can expect from this healthcare program.
  4. Insurance

    Find Secure And Affordable Post-Work Health Insurance

    Learn how you can avoid financial catastrophe - without Medicare.
  5. Retirement

    Health-y Savings Accounts

    HSAs can provide a new way to save for retirement and medical expenses.
  6. Investing

    Is There An Upside For Isis Pharmaceutical Shares?

    Shareholders in biotechnology company Isis Pharmaceuticals have endured a wild, but ultimately enjoyable, ride since late 2012.
  7. Investing

    Looking To Invest In the Third-Largest Pharmacy?

    Rite Aid Corporation's $4 billion purchase of the Eckerd retail pharmacy chain during the Great Recession might not have been its savviest decision.
  8. Investing

    Why Should Investors Be Wary Of Organovo?

    Few industries are as hit-or-miss as healthcare. Depending upon the success of a company's drug or device pipeline, your investment could lose or win.
  9. Economics

    Dilip Shanghvi's Net Worth: How Did He Get So Rich?

    Dilip Shanghvi made Sun Pharma a huge global business through smart acquisitions and strategic entry into the right market sectors.
  10. Insurance

    Rating Assurant Prepaid Vs. Delta PPO dental plans

    As more consumers – and dentists – join insurance plans, here’s help in choosing benefits that are right for you.

You May Also Like

Hot Definitions
  1. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  2. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  3. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  4. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  5. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
  6. Irrevocable Trust

    A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets ...
Trading Center