Mercatus Center: Politician contributions may impact CON approval rates

Political contributions may play a role in whether officials approve certificate-of-need applications, according to a Mercatus Center working paper by Thomas Stratmann, PhD, senior research fellow, and Steven Monaghan, a third year PhD student.

Dr. Stratmann and Mr. Monaghan created a model to estimate how political contributions impact the CON application. The pair looked at data from Georgia, Michigan and Virginia, three states where the governor and state senates have roles in selecting individuals who make decisions on the CON application process.

Here is what they found:

Georgia
1. Officials approved 57 percent of CONs, leading the authors to conclude the low approval rate is likely due to an incentive for firms to make political contributions.

2. Nearly 43 percent of applications are linked to political contributions.

3. Overall, the authors found a 1 percent rise in campaign contributions to state senators and the governor is linked to a 6.7 percent increase in a CON's probability of approval.

Michigan
4. Michigan boasted the highest application approval rate of 77 percent.

5. Nearly 36 percent of firms applying for a CON made political contributions near the time for a CON approval decision.

6. A 1 percent increase in contributions is linked with a 1.7 increase in a chance for application approval.

Virginia
7. State officials approved 51 percent of CON applications.

8. Fifty-six percent of applicant firms made political contributions.

9. Authors noted a 1 percent increase in contributions led to a 3.6 percent in chance of CON approval.

10. The researchers said their analysis indicates political contributions impact the CON approval process.

The authors state, "If it is true that firms are attempting to acquire benefits by making political campaign contributions, then this is a major cost of CON laws that has not previously been considered. Previous research that has failed to consider this cost has understated the true costs of CON laws."

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