The Commercialization of Nursing Home Care: Does For-Profit Efficiency Mean Lower Quality or do Corporations Provide the Best of Both Worlds?

This study examines for-profit conversion of the U.S. nursing home sector, focusing on the growth of for-profit chains and the possible decline of independent nonprofit facilities. We take advantage of a natural experiment that occurred during the 1990s, in which for-profit chains and non-profit facilities competed in local markets throughout the country. We address a series of questions concerning the relative cost and quality performance of for-profit chains and independent non-profits, including both cross-sectional comparisons and dynamic changes that occur through entry, exit, and change of surviving non-profit organizations. At the core of our study is the question of whether non-profit organizations are increasingly emulating the performance levels of their for-profit competitors or whether they are differentiating within market segments that have higher quality and higher cost. The study tracks several thousand nursing homes for seven years. The results contribute both to a health policy debate and to our conceptual understanding of the strategic characteristics of different organizational forms.