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An Econometric Analysis of Costs and Scale Economies in the Nursing Home Industry


  • Niccie L. McKay


This paper examines costs in the nursing home industry, an issue of concern to policymakers because Medicaid pays about half of the expenditures on nursing home care. The paper estimates two cost functions for a sample of Texas nursing homes in 1983: one assumes that all homes provide the same quality of care, the other considers quality differences. The results indicate that there are economies of scale in the production of nursing home care. This suggests that many states could serve the same number of Medicaid patients at a lower total cost if occupancy rates were higher, and that a fixed rate reimbursement policy could lower costs.

Suggested Citation

  • Niccie L. McKay, 1988. "An Econometric Analysis of Costs and Scale Economies in the Nursing Home Industry," Journal of Human Resources, University of Wisconsin Press, vol. 23(1), pages 57-75.
  • Handle: RePEc:uwp:jhriss:v:23:y:1988:i:1:p:57-75

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    1. repec:dau:papers:123456789/11700 is not listed on IDEAS
    2. Virender Kumar & Edward Norton & William Encinosa, 2006. "OBRA 1987 and the quality of nursing home care," International Journal of Health Economics and Management, Springer, vol. 6(1), pages 49-81, March.
    3. Shimizutani, Satoshi & Suzuki, Wataru, 2007. "Quality and efficiency of home help elderly care in Japan: Evidence from micro-level data," Journal of the Japanese and International Economies, Elsevier, vol. 21(2), pages 287-301, June.
    4. Quitterie Roquebert, 2015. "Distribution costs in home-care production: what are the effects of local regulations on productive efficiency and spatial equity?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01294742, HAL.
    5. Marie-Eve Joël & Romain Sibille, 2013. "Education and career path of French nursing home managers : impact on their human resources practices," Post-Print hal-01522519, HAL.
    6. Yu, Wei & Bradford, Garnett L., 1995. "Rural-Urban Differences In Nursing Home Access, Quality And Cost," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 27(02), December.
    7. SHIMIZUTANI Satoshi & SUZUKI Wataru, 2002. "The Quality and Efficiency of At-Home Long-term Care in Japan: Evidence from Micro-level Data," ESRI Discussion paper series 018, Economic and Social Research Institute (ESRI).
    8. Vitaliano, Donald F., 2003. "Do not-for-profit firms maximize profit?," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(1), pages 75-87.
    9. Eric W. Christensen, 2004. "Scale and scope economies in nursing homes: A quantile regression approach," Health Economics, John Wiley & Sons, Ltd., vol. 13(4), pages 363-377.

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