The principal-agent problem and owner-managers: An instrumental variables application to nursing home quality

TitleThe principal-agent problem and owner-managers: An instrumental variables application to nursing home quality
Publication TypeJournal Article
Year of Publication2018
AuthorsHuang S.S, Bowblis J.R
JournalHealth Econ
Volume27
Issue11
Pagination1653-1669
Date PublishedNov
ISBN Number1057-9230
Accession Number29968263
Keywordsdifferential distance, instrumental variables, managerial ownership, nursing home, organizational structure, principal-agent problem, quality
Abstract

The literature on provider ownership has primarily focused broadly on for-profits compared with nonprofits and chains versus nonchains. However, the understanding of more nuanced ownership arrangements within individual facilities is limited. Utilizing the principal-agent and managerial control frameworks, we study the role of managerial ownership and its relationship to quality among for-profit nursing homes (NHs). We identify NH administrators with more than 5% ownership (owner-manager) from Ohio Medicaid Cost Reports (2005-2010) and link these data to long-stay resident records in the Minimum Data Set. Using differential distance to the nearest NHs with a salaried manager relative to an owner-manager, we address the differential selection into these two types of NHs. After instrumenting for admissions to owner-managed NHs, quality among long-stay residents at owner-managed NHs is generally better than NHs with salaried managers. We find suggestive evidence that the magnitudes of quality difference are larger when the principal-agent problem is likely more pronounced, such as when NHs that are part of a multifacility chain and located in more concentrated markets.

URLhttps://www.ncbi.nlm.nih.gov/pubmed/29968263
DOI10.1002/hec.3792
Short TitleHealth economicsHealth economics
Alternate JournalHealth economics