Nonprofit vs. For-Profit: Allocation of Beds and Access to Care in U.S. Nursing Homes

44 Pages Posted: 30 Nov 2020 Last revised: 8 Jul 2021

Date Written: July 7, 2021

Abstract

Motivated by bed allocation patterns of U.S. nursing homes, we formulate a queueing network model to study nonprofit and for-profit nursing homes' bed allocation decisions and the resulting access to care for the public. Nursing homes have a fixed number of beds that can be allocated among three types: Medicare-dedicated beds (for the Medicare population only), Medicaid-dedicated beds (for the Medicaid population only), and flexible beds (for both populations). To distinguish between nonprofit and for-profit nursing homes, we incorporate altruism into a nonprofit nursing home's objective function to capture resident welfare. This model makes three theoretical predictions. First, it is generally optimal for nursing homes to have flexible beds and Medicare-dedicated beds, but not Medicaid-dedicated beds. Second, when the Medicaid arrival rate is sufficiently high, it is optimal for nonprofit nursing homes to have a higher proportion of Medicare-dedicated beds than their for-profit counterparts, thereby providing lower access to care for the Medicaid population. Third, when the Medicare arrival rate is sufficiently low, it is optimal for nonprofit nursing homes to have a lower proportion of Medicare-dedicated beds than their for-profit counterparts, thereby providing higher access to care for the Medicaid population. These predictions are supported by two empirical tests: (1) a cross-sectional analysis on U.S. nursing homes, (2) a difference-in-differences analysis on U.S. nursing home ownership conversions from nonprofit to for-profit. Our study shows that, contrary to public concerns, for-profit nursing homes can actually provide higher access to care for the Medicaid-covered population than their nonprofit counterparts.

Keywords: Healthcare, Queueing Network, Nursing Homes, Nonprofit, Access to Care

Suggested Citation

Jiang, Yangzi and Lu, Lauren Xiaoyuan and Van Mieghem, Jan Albert, Nonprofit vs. For-Profit: Allocation of Beds and Access to Care in U.S. Nursing Homes (July 7, 2021). Available at SSRN: https://ssrn.com/abstract=3738684 or http://dx.doi.org/10.2139/ssrn.3738684

Yangzi Jiang (Contact Author)

Kellogg School of Management, Northwestern University ( email )

2211 Campus Dr
Evanston, IL 60208
United States

Lauren Xiaoyuan Lu

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Jan Albert Van Mieghem

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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