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Drivers of home care agency closure: evidence from England

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  • Allan, Stephen

Abstract

Context: Hundreds of thousands of people in England with long-term care needs are supported by more than 10,000 home care agencies. However, little is known about the market dynamics of home care supply, either in England or internationally. Objective: To understand the reasons for home care agency closure in England. Method: Regression analysis of the future status of home care agencies open in the period 2015–2017 using a panel dataset of 98% of all agencies registered to provide care in England. Measures of quality, competition and other local area demand and supply factors, e.g. population, needs and rurality, were included in the analysis. Instrumental variable methods were used to address endogeneity in the relationship between closure and both competition and quality. Findings: Fourteen point two per cent of home care agencies had closed one year after observation, with some differences observed by region. Regression analysis confirmed that higher competition and lower quality significantly increased closure likelihood. A new agency locating immediately next to the average provider would increase the likelihood of closure of the existing agency by a quarter. Independent agencies and those which supported a local population with higher needs had significantly reduced chance of closure. Limitations: There were data limitations to the analysis, with no information on size of agencies and assumptions made on where they delivered care. Implications: Competitive effects in home care markets must be carefully considered given the importance of ensuring equitable access to care. The findings also confirm the importance of quality regulation in long-term care.

Suggested Citation

  • Allan, Stephen, 2024. "Drivers of home care agency closure: evidence from England," LSE Research Online Documents on Economics 122544, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:122544
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    File URL: https://researchonline.lse.ac.uk/id/eprint/122544/
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    References listed on IDEAS

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    1. Allan, Stephen & Gousia, Katerina & Forder, Julien, 2021. "Exploring differences between private and public prices in the English care homes market," Health Economics, Policy and Law, Cambridge University Press, vol. 16(2), pages 138-153, April.
    2. Dan Liu & Maria Lucia Pace & Maria Goddard & Rowena Jacobs & Raphael Wittenberg & Anne Mason, 2021. "Investigating the relationship between social care supply and healthcare utilization by older people in England," Health Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 36-54, January.
    3. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    4. Stephen Allan & Julien Forder, 2015. "The Determinants of Care Home Closure," Health Economics, John Wiley & Sons, Ltd., vol. 24(S1), pages 132-145, March.
    5. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057, Elsevier.
    6. Stephen Allan & Julien Forder, 2015. "The Determinants of Care Home Closure," Health Economics, John Wiley & Sons, Ltd., vol. 24, pages 132-145, March.
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    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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