The Economies of Scale for Nursing Home Care

Li Wu Chen, Dennis G. Shea

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

Using a modified hybrid short-term operating cost function and a national sample of nursing homes in 1994, the authors examined the scale economies of nursing home care. The results show that scale economies exist for Medicare postacute care, with an elasticity of -0.15 and an optimal scale of around 4, 000 patient days annually. However, more than 68 percent of nursing homes in the analytic sample produced Medicare days at a level below the optimal scale. The financial pressures resulting from the implementation of a prospective payment system for Medicare skilled nursing facilities may further reduce the quantity of Medicare days served by nursing homes. In addition, the results show that chain-owned nursing homes do not have lower short-term operating costs than do independent facilities. This indicates that the rationale behind recent increasing horizontal integration among nursing homes may not be seeking greater cost efficiency but some other consideration.

Original languageEnglish (US)
Pages (from-to)38-63
Number of pages26
JournalMedical Care Research and Review
Volume61
Issue number1
DOIs
StatePublished - Mar 1 2004

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Home Care Services
Nursing Care
nursing home
Nursing Homes
home care
Medicare
economy
operating costs
Costs and Cost Analysis
Subacute Care
Prospective Payment System
Skilled Nursing Facilities
Elasticity
nursing
Pressure
efficiency
costs

All Science Journal Classification (ASJC) codes

  • Nursing(all)
  • Health(social science)
  • Health Professions(all)
  • Health Policy

Cite this

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The Economies of Scale for Nursing Home Care. / Chen, Li Wu; Shea, Dennis G.

In: Medical Care Research and Review, Vol. 61, No. 1, 01.03.2004, p. 38-63.

Research output: Contribution to journalArticle

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