IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v34y2002i4p413-420.html
   My bibliography  Save this article

The competitive nature of the nursing home industry: price mark ups and demand elasticities

Author

Listed:
  • Dana Mukamel
  • William Spector

Abstract

Nursing home markets are likely to deviate from a competitive structure because of limitations on entry imposed by Certificate of Need (CON) regulations and the potential for product differentiation along such attributes as location, religious affiliation and quality. This paper investigates the structure of nursing home markets in New York State by calculating price mark ups and residual private pay demand elasticities. It shows that the residual demand elasticity is bound by estimates based on price mark ups above marginal costs and above Medicaid rates. This approach allows estimation of demand elasticities in all markets, whether or not CON regulations constrain bed supply. Mean price elasticities (in absolute value) calculated for nursing homes in New York State in 1991 ranged from 3.46 to 3.85.

Suggested Citation

  • Dana Mukamel & William Spector, 2002. "The competitive nature of the nursing home industry: price mark ups and demand elasticities," Applied Economics, Taylor & Francis Journals, vol. 34(4), pages 413-420.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:4:p:413-420
    DOI: 10.1080/00036840110044199
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840110044199
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036840110044199?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dor, Avi, 1989. "The costs of Medicare patients in nursing homes in the United States : A multiple output analysis," Journal of Health Economics, Elsevier, vol. 8(3), pages 253-270, December.
    2. McCarthy, Thomas R., 1985. "The competitive nature of the primary-care physician services market," Journal of Health Economics, Elsevier, vol. 4(2), pages 93-117, June.
    3. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    4. Cohen, Joel W. & Spector, William D., 1996. "The effect of Medicaid reimbursement on quality of care in nursing homes," Journal of Health Economics, Elsevier, vol. 15(1), pages 23-48, February.
    5. Nyman, John A., 1989. "The private demand for nursing home care," Journal of Health Economics, Elsevier, vol. 8(2), pages 209-231, June.
    6. Nyman, John A, 1994. "The Effects of Market Concentration and Excess Demand on the Price of Nursing Home Care," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 193-204, June.
    7. Nyman, John A., 1985. "Prospective and `cost-plus' medicaid reimbursement, excess medicaid demand, and the quality of nursing home care," Journal of Health Economics, Elsevier, vol. 4(3), pages 237-259, September.
    8. Richard Dusansky, 1989. "On the Economics of Institutional Care of the Elderly in the U.S.: The Effects of a Change in Government Reimbursement," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(1), pages 141-150.
    9. Gertler, Paul J, 1992. "Medicaid and the Cost of Improving Access to Nursing Home Care," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 338-345, May.
    10. Barry R. Chiswick, 1976. "The Demand for Nursing Home Care: An Analysis of the Substitution between Institutional and Noninstitutional Care," Journal of Human Resources, University of Wisconsin Press, vol. 11(3), pages 295-316.
    11. Grannemann, Thomas W. & Brown, Randall S. & Pauly, Mark V., 1986. "Estimating hospital costs : A multiple-output analysis," Journal of Health Economics, Elsevier, vol. 5(2), pages 107-127, June.
    12. Nyman, John A., 1988. "The marginal cost of nursing home care : New York, 1983," Journal of Health Economics, Elsevier, vol. 7(4), pages 393-412, December.
    13. John A. Nyman, 1988. "Excess Demand, the Percentage of Medicaid Patients, and the Quality of Nursing Home Care," Journal of Human Resources, University of Wisconsin Press, vol. 23(1), pages 76-92.
    14. A. P. Lerner, 1934. "The Concept of Monopoly and the Measurement of Monopoly Power," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 1(3), pages 157-175.
    15. Feldman, Roger & Dowd, Bryan, 1986. "Is there a competitive market for hospital services?," Journal of Health Economics, Elsevier, vol. 5(3), pages 277-292, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kris Knox & Eric Blankmeyer & J. Stutzman, 2006. "Private-Pay Demand for Nursing Facilities in a Market with Excess Capacity," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 34(1), pages 75-83, March.
    2. Huang, Sean Shenghsiu & Hirth, Richard A., 2016. "Quality rating and private-prices: Evidence from the nursing home industry," Journal of Health Economics, Elsevier, vol. 50(C), pages 59-70.
    3. Roman Mennicken & Boris Augurzky & Heinz Rothgang & Jürgen Wasem, 2010. "Explaining Differences in Remuneration Rates of Nursing Homes in Germany," Ruhr Economic Papers 0215, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    4. Brendstrup, Bjarne & Paarsch, Harry J. & Solow, John L., 2006. "Estimating market power in the presence of capacity constraints: An application to high-fructose corn sweetener," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 251-267, March.
    5. Bilotkach, Volodymyr & Braakmann, Nils & Gonzalo-Almorox, Eduardo & Wildman, John, 2017. "The effect of house prices on the long-term care market: Evidence from England," MPRA Paper 81987, University Library of Munich, Germany.
    6. Piia Pekola & Ismo Linnosmaa & Hennamari Mikkola, 2017. "Does Competition Have an Effect on Price and Quality in Physiotherapy?," Health Economics, John Wiley & Sons, Ltd., vol. 26(10), pages 1278-1290, October.
    7. Sean Shenghsiu Huang & Richard A. Hirth & Jane Banaszak-Holl & Stephanie Yuan, 2017. "The Growth and Geographical Variation of Nursing Home Self-Pay Prices," Working Papers wp397, University of Michigan, Michigan Retirement Research Center.
    8. Roman Mennicken & Boris Augurzky & Heinz Rothgang & Jürgen Wasem, 2014. "Explaining differences in remuneration rates of nursing homes in Germany," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(4), pages 401-410, May.
    9. repec:zbw:rwirep:0215 is not listed on IDEAS
    10. Visa Pitkänen, 2022. "Competition and efficiency in repeated procurements: Lessons from the Finnish rehabilitation markets," Health Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 820-835, May.
    11. Forder, Julien & Allan, Stephen, 2014. "The impact of competition on quality and prices in the English care homes market," Journal of Health Economics, Elsevier, vol. 34(C), pages 73-83.
    12. Su Liu & Deborah Chollet, "undated". "Price and Income Elasticity of the Demand for Health Insurance and Health Care Services: A Critical Review of the Literature," Mathematica Policy Research Reports dbf03ba11863430593b0b825f, Mathematica Policy Research.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Grabowski, David C., 2001. "Medicaid reimbursement and the quality of nursing home care," Journal of Health Economics, Elsevier, vol. 20(4), pages 549-569, July.
    2. Andrew T. Ching & Fumiko Hayashi & Hui Wang, 2015. "Quantifying The Impacts Of Limited Supply: The Case Of Nursing Homes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(4), pages 1291-1322, November.
    3. repec:zbw:rwirep:0470 is not listed on IDEAS
    4. Cohen, Joel W. & Spector, William D., 1996. "The effect of Medicaid reimbursement on quality of care in nursing homes," Journal of Health Economics, Elsevier, vol. 15(1), pages 23-48, February.
    5. Arndt R. Reichert & Magdalena A. Stroka, 2018. "Nursing home prices and quality of care — Evidence from administrative data," Health Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 129-140, January.
    6. Grabowski, David C. & Hirth, Richard A., 2003. "Competitive spillovers across non-profit and for-profit nursing homes," Journal of Health Economics, Elsevier, vol. 22(1), pages 1-22, January.
    7. Jennifer L. Troyer, 2002. "Cross‐Subsidization in Nursing Homes: Explaining Rate Differentials Among Payer Types," Southern Economic Journal, John Wiley & Sons, vol. 68(4), pages 750-773, April.
    8. Martin, Cécile, 2014. "Concurrence, prix et qualité de la prise en charge en EHPAD en France : Analyses micro-économétriques," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/13712 edited by Dormont, Brigitte.
    9. Arndt R. Reicher & Magdalena Stroka, 2014. "Nursing Home Prices and Quality of Care - Evidence from Administrative Data," Ruhr Economic Papers 0470, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    10. Nishimura, Y.; Oikawa, M.;, 2017. "Effects of Informal Elderly Care on Labor Supply: Exploitation of Government Intervention on the Supply Side of Elderly Care Market," Health, Econometrics and Data Group (HEDG) Working Papers 17/02, HEDG, c/o Department of Economics, University of York.
    11. Shimizutani, Satoshi & Suzuki, Wataru, 2007. "Quality and efficiency of home help elderly care in Japan: Evidence from micro-level data," Journal of the Japanese and International Economies, Elsevier, vol. 21(2), pages 287-301, June.
    12. David C. Grabowski & Edward C. Norton, 2012. "Nursing Home Quality of Care," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 29, Edward Elgar Publishing.
    13. Haizhen Lin, 2015. "Quality Choice And Market Structure: A Dynamic Analysis Of Nursing Home Oligopolies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(4), pages 1261-1290, November.
    14. Foster, Andrew D. & Lee, Yong Suk, 2015. "Staffing subsidies and the quality of care in nursing homes," Journal of Health Economics, Elsevier, vol. 41(C), pages 133-147.
    15. SHIMIZUTANI Satoshi & SUZUKI Wataru, 2002. "The Quality and Efficiency of At-Home Long-term Care in Japan: Evidence from Micro-level Data," ESRI Discussion paper series 018, Economic and Social Research Institute (ESRI).
    16. Jeffrey P. Ballou, 2008. "Do Nonprofit And Government Nursing Homes Enter Unprofitable Markets?," Economic Inquiry, Western Economic Association International, vol. 46(2), pages 241-260, April.
    17. Haizhen Lin, 2010. "Do Minimum Quality Standards Improve Quality? A Case Study of the Nursing Home Industry," Working Papers 2010-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    18. Haizhen Lin, 2014. "Revisiting the relationship between nurse staffing and quality of care in nursing homes: An instrumental variables approach," Working Papers 2014-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    19. Lin, Haizhen, 2014. "Revisiting the relationship between nurse staffing and quality of care in nursing homes: An instrumental variables approach," Journal of Health Economics, Elsevier, vol. 37(C), pages 13-24.
    20. Dwayne Banks & Elliott Parker & Jeanne Wendel, 2001. "Strategic interaction among hospitals and nursing facilities: the efficiency effects of payment systems and vertical integration," Health Economics, John Wiley & Sons, Ltd., vol. 10(2), pages 119-134, March.
    21. Bowblis, John R. & McHone, Heather S., 2013. "An instrumental variables approach to post-acute care nursing home quality: Is there a dime's worth of evidence that continuing care retirement communities provide higher quality?," Journal of Health Economics, Elsevier, vol. 32(5), pages 980-996.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:34:y:2002:i:4:p:413-420. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.