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Public Reporting and Demand Rationing: Evidence from the Nursing Home Industry

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  • Daifeng He
  • R. Tamara Konetzka

Abstract

This paper examines an under‐explored unintended consequence of public reporting: the potential for demand rationing. Public reporting, although intended to increase consumer access to high‐quality products, may have provided the perverse incentive for high‐quality providers facing fixed capacity and administrative pricing to avoid less profitable types of residents. Using data from the nursing home industry before and after the implementation of the public reporting system in 2002, we find that high‐quality nursing homes facing capacity constraints reduced admissions of less profitable Medicaid residents while increasing the more profitable Medicare and private‐pay admissions, relative to low‐quality nursing homes facing no capacity constraints. These effects, although small in magnitude, are consistent with provider rationing of demand on the basis of profitability and underscore the important role of institutional details in designing effective public reporting systems for regulated industries. Copyright © 2014 John Wiley & Sons, Ltd.

Suggested Citation

  • Daifeng He & R. Tamara Konetzka, 2015. "Public Reporting and Demand Rationing: Evidence from the Nursing Home Industry," Health Economics, John Wiley & Sons, Ltd., vol. 24(11), pages 1437-1451, November.
  • Handle: RePEc:wly:hlthec:v:24:y:2015:i:11:p:1437-1451
    DOI: 10.1002/hec.3097
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    1. Hendrik Schmitz & Magdalena A. Stroka‐Wetsch, 2020. "Determinants of nursing home choice: Does reported quality matter?," Health Economics, John Wiley & Sons, Ltd., vol. 29(7), pages 766-777, July.
    2. Huang, Sean Shenghsiu & Hirth, Richard A., 2016. "Quality rating and private-prices: Evidence from the nursing home industry," Journal of Health Economics, Elsevier, vol. 50(C), pages 59-70.
    3. Norton, E.C., 2016. "Health and Long-Term Care," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 951-989, Elsevier.
    4. Bär, Marlies & Bakx, Pieter & Wouterse, Bram & van Doorslaer, Eddy, 2022. "Estimating the health value added by nursing homes," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 1-23.
    5. Marcelo Coca Perraillon & R. Tamara Konetzka & Daifeng He & Rachel M. Werner, 2019. "Consumer Response to Composite Ratings of Nursing Home Quality," American Journal of Health Economics, MIT Press, vol. 5(2), pages 165-190, Spring.
    6. Bar, M.; & Bakx, P.; & Wouterse, B.; & van Doorslaer, Eddy.;, 2022. "Estimating the health value added by nursing homes," Health, Econometrics and Data Group (HEDG) Working Papers 22/12, HEDG, c/o Department of Economics, University of York.

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