Profitability and Public Reporting: Evidence from Nursing Homes

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DESCRIPTION (provided by applicant): Market-based reforms such as public reporting of health care quality have become popular policy tools intended to improve quality efficiently, but their effects have been modest and somewhat inconsistent. The objective of this study is to enhance public reporting policies by exploring a primary reason for their lack of success: the failure to account for the roles of payment policy and market structure in the strategic response of providers. Public reporting may possibly, and even likely, lead to an incentive to improve quality for some providers but not for others, with decreases in quality even being optimal for some providers in the context of such market features as government administered prices and less competition. Furthermore, the strategic response of any provider may not simply be a change in quality but rather a change in price, payer mix, or exit from the market. It is therefore unclear whether we should expect public reporting to be welfare-improving or even quality-improving. This type of heterogeneity of response has been understudied in the literature, yet substantial resources continue to be poured into public reporting systems, with health care reform promising even more emphasis on market-based reforms. We propose to examine the relationship between quality improvement and expected strategic response based on payment incentives and structural characteristics of providers and markets, drawing on data from nursing homes. Our Specific Aims are: 1) To assess the effect of public reporting in the presence of competing financial incentives, and 2) To assess strategic response to public reporting within the context of market structure and payment incentives. To address these aims, we propose to use a long panel (1998-2010) of merged Minimum Data Set data and Online Survey, Certification, and Reporting data. This research has the potential to change the way we think about health care report cards and their ability to incent quality and efficiency as we move forward in the implementation of health reform. PUBLIC HEALTH RELEVANCE: Our overall goal in this study is to improve the quality of care for nursing home residents by critically examining and developing improvements to a major policy initiative -public reporting of quality information- in terms of the interaction between this initiative and the competing incentives that providers face. Nursing home care is a critical health care and health policy issue which promises to become even more important and costly as the population ages.