An empirical examination of relative profitability in the nursing facility industry between ownership form and regionality in the state of Texas

The purpose of this research is to examine the relative profitability of the firm within the nursing facility industry in Texas. An examination is made of the variables expected to affect profitability and of importance to the design and implementation of regulatory policy. To facilitate this inquiry, specific questions addressed are: (1) Do differences in ownership form affect profitability (defined as operating income before fixed costs)? (2) What impact does regional location have on profitability? (3) Do patient case-mix and access to care by Medicaid patients differ between proprietary and non-profit firms and facilities located in urban versus rural regions, and what association exists between these variables and profitability? (4) Are economies of scale present in the nursing home industry? (5) Do nursing facilities operate in a competitive output market characterized by the inability of a single firm to exhibit influence over market price?^ Prior studies have principally employed a cost function to assess efficiency differences between classifications of nursing facilities. The inherent weakness in this approach is that it only considers technical efficiency. Not both technical and price efficiency which are the two components of overall economic efficiency. One firm is more technically efficient compared to another if it is able to produce a given quantity of output at the least possible costs. Price efficiency means that scarce resources are being directed towards their most valued use. Assuming similar prices in both input and output markets, differences in overall economic efficiency between firm classes are assessed through profitability, hence a profit function.^ Using the framework of the profit function, data from 1990 Medicaid Costs Reports for Texas, and the analytic technique of Ordinary Least Squares Regression, the findings of the study indicated (1) similar profitability between nursing facilities organized as for-profit versus non-profit and located in urban versus rural regions, (2) an inverse association between both payor-mix and patient case-mix with profitability, (3) strong evidence for the presence of scale economies, and (4) existence of a competitive market structure. The paper concludes with implications regarding reimbursement methodology and construction moratorium policies in Texas. ^

Home care service utilization in British Columbia: Substitute or complement to acute care?

The desire to promote efficient allocation of health resources and effective patient care has focused attention on home care as an alternative to acute hospital service. in particular, clinical home care is suggested as a substitute for the final days of hospital stay. This dissertation evaluates the relationship between hospital and home care services for residents of British Columbia, Canada beginning in 1993/94 using data from the British Columbia Linked Health database. ^ Lengths of stay for patients referred to home care following hospital discharge are compared to those for patients not referred to home care. Ordinary least squares regression analysis adjusts for age, gender, admission severity, comorbidity, complications, income, and other patient, physician, and hospital characteristics. Home care clients tend to have longer stays in hospital than patients not referred to home care (β = 2.54, p = 0.0001). Longer hospital stays are evident for all home care client groups as well as both older and younger patients. Sensitivity analysis for referral time to direct care and extreme lengths of stay are consistent with these findings. Two stage regression analysis indicates that selection bias is not significant.^ Patients referred to clinical home care also have different health service utilization following discharge compared to patients not referred to home care. Home care nursing clients use more medical services to complement home care. Rehabilitation clients initially substitute home care for physiotherapy services but later are more likely to be admitted to residential care. All home care clients are more likely to be readmitted to hospital during the one year follow-up period. There is also a strong complementary association between direct care referral and homemaker support. Rehabilitation clients have a greater risk of dying during the year following discharge. ^ These results suggest that home care is currently used as a complement rather than a substitute for some acute health services. Organizational and resource issues may contribute to the longer stays by home care clients. Program planning and policies are required if home care is to provide an effective substitute for acute hospital days. ^