Cost (In)Efficiency and Institutional Pressures in Nursing Home Chains

Over the past ten years, merger activities in the private for-profit nursing home industry have been increasing in Europe. In this paper, we investigate chain affiliation’s influence on the performance of lucrative nursing homes. We measure performance using a cost frontier estimated by stochastic analysis on a sample of 370 French for-profit nursing homes. We find that cost efficiency decreases with the number of facilities in a chain. We also identify different external actor types in nursing homes’ institutional environment and test their influence. We show that nursing home chains’ cost efficiency improves when local governments and shareholders exert pressure. Our results are robust to alternative model specifications and another definition of costs. Overall, our findings inform researchers, as well as standards setters, of the relevance of chain affiliation and of the role of institutional pressures regarding cost containment at the nursing home level