A regulatory mechanism is ‘Certificate of Need’ (CON) which allows states to exercise oversight in the installation of high-expense technologies or facility construction.  The entry of new providers of certain technologies or facilities must obtain state approval as part of the permitting process to initiate business activities.  All states had such regulatory control until the 1980’s when the federal requirement for CON was lifted.   With the removal of this federal regulation to obtain state CON, fifteen states dropped CON while thirty-five retained it.  The justification for CON regulation is that states need to control the proliferation of high expense medical equipment and services, possible reflecting the belief that a ‘ hospital bed built is a bed used.”  A number of studies have shown that CON regulation does not significantly impact the price or service provision of hospital services.  Prices for hospital services in states with CON regulation are not significantly different from prices in states without such regulation.  This finding has been a primary item for health economists who argue that CON regulations should be eliminated.While the elimination of CON regulations does not lead to a proliferation of hospital services, the impact on nursing homes of such regulation may be less predictable.  States are the primary payer for nursing home residents through Medicaid and until Medicare added the part D drug benefit, Medicaid expenses were growing faster than Medicare.  This expense growth, paid in part from state budgets, gives the states an incentive to limit nursing home construction and thus to preserve CON regulation.  Using state data estimates of Medicaid spending are presented using a state’s CON status (required or not and if nursing home construction falls under its purview or not) as one of the independent variables.  States, such as Virginia, that have a rich pro-business tradition may choose not to abandon CON regulation because of its impact on restricting Medicaid growth