Does Technology Substitute for Nurses? Staffing Decisions in Nursing Homes

Management Science, Forthcoming

Simon Business School Working Paper No. FR 17-02

40 Pages Posted: 17 Oct 2016 Last revised: 5 Jun 2017

See all articles by Susan F. Lu

Susan F. Lu

Purdue University - Krannert School of Management

Huaxia Rui

University of Rochester - Simon Business School

Abraham Seidmann

University of Rochester - Simon Business School

Date Written: September 12, 2016

Abstract

Over the past ten years, many healthcare organizations have made significant investments in automating their clinical operations, mostly through the introduction of advanced information systems. Yet the impact of these investments on staffing is still not well understood. In this paper, we study the effect of IT-enabled automation on staffing decisions in healthcare facilities. Using unique nursing home IT data from 2006 to 2012, we find that the licensed nurse staffing level decreases by 5.8% in high-end nursing homes but increases by 7.6% in low-end homes after the adoption of automation technology. Our research explains this by analyzing the interplay of two competing effects of automation: the substitution of technology for labor and the leveraging of complementarity between technology and labor. We also find that increased automation improves the ratings on clinical quality by 6.9% and decreases admissions of less profitable residents by 14.7% on average. These observations are consistent with the predictions of an analytical staffing model that incorporates technology adoption and vertical differentiation. Overall, these findings suggest that the impact of automation technology on staffing decisions depends crucially on a facility’s vertical position in the local marketplace.

Keywords: staffing, labor, automation technology, vertical differentiation, nursing homes

Suggested Citation

Lu, Susan Feng and Rui, Huaxia and Seidmann, Abraham Avi, Does Technology Substitute for Nurses? Staffing Decisions in Nursing Homes (September 12, 2016). Management Science, Forthcoming; Simon Business School Working Paper No. FR 17-02. Available at SSRN: https://ssrn.com/abstract=2852374

Susan Feng Lu

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

HOME PAGE: http://https://sites.google.com/site/susanluhome/home

Huaxia Rui (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Abraham Avi Seidmann

University of Rochester - Simon Business School ( email )

Carol Simon Hall 3-333C
Rochester, NY 14627
United States
585-275-5694 (Phone)
585-275-9331 (Fax)

HOME PAGE: http://www.ssb.rochester.edu/fac/Seidmannav/

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