Organizational Form and Nursing Home Behavior

Abstract

The authors identify differences in performance among for-profit, nonprofit, and government-owned nursing homes in Minnesota. They investigate whether homes of diverse ownership types distribute their surpluses differently, if those differences narrow over time, and if the various ownership types react differently to changes in the regulatory environment. Government-owned and nonprofit homes spend more per resident day for nursing care costs than do independent for-profit homes. Chain affiliation is important in explaining persistent spending differences. There is an agency problem: Nursing homes belonging to chains behave differently from their independent counterparts. Secular non-profits belonging to national chains spend less of their surplus on nursing care costs after regulations allowed more of this form of spending to be recouped in rates charged to the residents. The secular firms affiliated with national chains spend less on nursing care than the control group. As the predicted surpluses of for-profit chains increase, the owners’ compensation falls.