Entry regulation and the effect of public reporting: Evidence from home health compare

Economic theory suggests that competition and information are complementary tools to promote healthcare quality. The existing empirical literature that documented this effect only focused on competition among existing firms. We extend this literature and examine another source of competition from the entry of new firms. We find that in home care, entry of new firms due to the deregulation of state Certificate of Need (CON) law significantly promotes quality improvement under public reporting, while competition among incumbent firms plays a smaller role. Since home care is a labor-intensive, capital-light industry, the state CON law is the 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 care and other labor intensive industries.