Certificate Of Need

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.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific benchmark, such as a SPDR. Unlike actively managed ETFs, passive ETFs are not managed by a fund manager on a daily basis.
  2. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another market so that it balances out. So when examining a specific market, if all other markets are in equilibrium, Walras' Law asserts that the examined market is also in equilibrium.
  3. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.
  4. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following:
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option is purchased and the lower premium option is sold - both at the same time. The higher the debit spread, the greater the initial cash outflow the investor will incur on the transaction.
  6. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious debt when government leaders use borrowed funds in ways that don't benefit or even oppress citizens. Some legal scholars argue that successor governments should not be held accountable for odious debt incurred by earlier regimes, but there is no consensus on how odious debt should actually be treated.
Trading Center