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The Determinants of Care Home Closure

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  • Stephen Allan
  • Julien Forder

Abstract

This study investigates the causes of full closure of care homes in the English care home/nursing home market. We develop theoretical arguments about two causes for closure that are triggered by errors or external shocks: poor economic sustainability and regulatory action. Homes aiming to operate with lower quality in the market are argued for a number of reasons to be more susceptible to errors/shocks in setting quality, especially negative errors, leading to an empirical hypothesis that observed quality should negatively affect closure chance. In addition, given quality, homes facing relatively high levels of local competition should also have an increased chance of closure. We use a panel of care homes from 2008 and 2010 to examine factors affecting their closure status in subsequent years. We allow for the potential endogeneity of home quality and use multiple imputation to replace missing data. Results suggest that homes with comparatively higher quality and/or lower levels of competition have less chance of closure than other homes. We discuss that the results provide some support for the policy of regulators providing quality information to potential purchasers in the market. © 2015 The Authors. Health Economics published by John Wiley & Sons Ltd.

Suggested Citation

  • Stephen Allan & Julien Forder, 2015. "The Determinants of Care Home Closure," Health Economics, John Wiley & Sons, Ltd., vol. 24(S1), pages 132-145, March.
    • Handle: RePEc:wly:hlthec:v:24:y:2015:i:s1:p:132-145
    DOI: 10.1002/hec.3149
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    1. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(1), pages 3-13.
    2. Forder, Julien & Allan, Stephen, 2014. "The impact of competition on quality and prices in the English care homes market," Journal of Health Economics, Elsevier, vol. 34(C), pages 73-83.
    3. Sutton, John, 1986. "Vertical Product Differentiation: Some Basic Themes," American Economic Review, American Economic Association, vol. 76(2), pages 393-398, May.
    4. Hirth, Richard A., 1999. "Consumer information and competition between nonprofit and for-profit nursing homes," Journal of Health Economics, Elsevier, vol. 18(2), pages 219-240, April.
    5. A. Colin Cameron & Pravin K. Trivedi, 2010. "Microeconometrics Using Stata, Revised Edition," Stata Press books, StataCorp LP, number musr, March.
    6. John R. Bowblis, 2011. "Ownership conversion and closure in the nursing home industry," Health Economics, John Wiley & Sons, Ltd., vol. 20(6), pages 631-644, June.
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    Cited by:

    1. Masayo Kashiwagi & Noriko Morioka, 2021. "Characteristics of Home-Visit Nursing Agencies That Closed after the 2012 Fee Revision for Home-Visit Nursing Services: A Nationwide Panel Data Analysis in Japan," IJERPH, MDPI, vol. 18(18), pages 1-14, September.
    2. James Gaughan & Hugh Gravelle & Rita Santos & Luigi Siciliani, 2017. "Long-term care provision, hospital bed blocking, and discharge destination for hip fracture and stroke patients," International Journal of Health Economics and Management, Springer, vol. 17(3), pages 311-331, September.

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