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An Econometric Analysis of Costs and Scale Economies in the Nursing Home Industry

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  • Niccie L. McKay

Abstract

This paper examines costs in the nursing home industry, an issue of concern to policymakers because Medicaid pays about half of the expenditures on nursing home care. The paper estimates two cost functions for a sample of Texas nursing homes in 1983: one assumes that all homes provide the same quality of care, the other considers quality differences. The results indicate that there are economies of scale in the production of nursing home care. This suggests that many states could serve the same number of Medicaid patients at a lower total cost if occupancy rates were higher, and that a fixed rate reimbursement policy could lower costs.

Suggested Citation

  • Niccie L. McKay, 1988. "An Econometric Analysis of Costs and Scale Economies in the Nursing Home Industry," Journal of Human Resources, University of Wisconsin Press, vol. 23(1), pages 57-75.
    • Handle: RePEc:uwp:jhriss:v:23:y:1988:i:1:p:57-75
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    Cited by:

    1. Randy I. Anderson & Robert Fok & Leonard V. Zumpano & Harold W. Elder, 1998. "Measuring the Efficiency of Residential Real Estate Brokerage Firms," Journal of Real Estate Research, American Real Estate Society, vol. 16(2), pages 139-158.
    2. repec:dau:papers:123456789/11700 is not listed on IDEAS
    3. Theis Theisen, 2020. "Municipalities’ Decision to Care: At Home or in a Nursing Home," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 26(4), pages 327-342, November.
    4. Virender Kumar & Edward Norton & William Encinosa, 2006. "OBRA 1987 and the quality of nursing home care," International Journal of Health Economics and Management, Springer, vol. 6(1), pages 49-81, March.
    5. 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.
    6. Quitterie Roquebert, 2015. "Distribution costs in home-care production: what are the effects of local regulations on productive efficiency and spatial equity?," Post-Print hal-01294742, HAL.
    7. Marie-Eve Joël & Romain Sibille, 2013. "Education and career path of French nursing home managers : impact on their human resources practices," Post-Print hal-01522519, HAL.
    8. Yu, Wei & Bradford, Garnett L., 1995. "Rural-Urban Differences In Nursing Home Access, Quality And Cost," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 27(2), pages 1-14, December.
    9. 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).
    10. Sajal Chattopadhyay & Subhash C. Ray, 1996. "Technical, scale, and size efficiency in nursing home care: A nonparametric analysis of Connecticut homes," Health Economics, John Wiley & Sons, Ltd., vol. 5(4), pages 363-373, July.
    11. Vitaliano, Donald F., 2003. "Do not-for-profit firms maximize profit?," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(1), pages 75-87.
    12. Eric W. Christensen, 2004. "Scale and scope economies in nursing homes: A quantile regression approach," Health Economics, John Wiley & Sons, Ltd., vol. 13(4), pages 363-377, April.
    13. Maryann Brady & Djeto Assane & Lewis Karstensson, 1994. "Cost structure in college and university student health centres," Applied Economics Letters, Taylor & Francis Journals, vol. 1(8), pages 123-126.
    14. Mehdi Farsi & Massimo Filippini, 2004. "An Empirical Analysis of Cost Efficiency in Non‐profit and Public Nursing Homes," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 75(3), pages 339-365, September.
    15. 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.
    16. Mehdi Farsi & Massimo Filippini & Michael Kuenzle, 2005. "Unobserved heterogeneity in stochastic cost frontier models: an application to Swiss nursing homes," Applied Economics, Taylor & Francis Journals, vol. 37(18), pages 2127-2141.

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