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Producing Health: Measuring Value Added of Nursing Homes

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  • Liran Einav
  • Amy Finkelstein
  • Neale Mahoney

Abstract

We develop a stylized model that allows us to estimate a value-added measure for nursing homes (“SNFs”) which accounts for patient selection both into and out of a SNF. We use the model, together with detailed data on the physical and mental health of about 6 million Medicare SNF patients between 2011 and 2016, to estimate the value added for about 14,000 distinct SNFs. We document substantial heterogeneity in value added. Nationwide, compared to a 10th percentile SNF, a 90th percentile SNF is able to discharge a patient at the same health level almost a week sooner, or one quarter of the median length of stay. Heterogeneity in value added within a market is almost as large as it is nationwide. Our results point to the potential for substantial gains through policies that encourage reallocation of patients to higher-quality SNFs within their market.

Suggested Citation

  • Liran Einav & Amy Finkelstein & Neale Mahoney, 2022. "Producing Health: Measuring Value Added of Nursing Homes," NBER Working Papers 30228, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30228
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    Cited by:

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    2. Marina Di Giacomo & Massimiliano Piacenza & Luca Salmasi & Gilberto Turati, 2024. "Understanding productivity in maternity wards," DISCE - Working Papers del Dipartimento di Economia e Finanza def134, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    3. Jonathan Gruber & David H. Howard & Jetson Leder-Luis & Theodore L. Caputi, 2025. "Dying or Lying? For-Profit Hospices and End-of-Life Care," American Economic Review, American Economic Association, vol. 115(1), pages 263-294, January.
    4. Laura Battaglia & Timothy Christensen & Stephen Hansen & Szymon Sacher, 2024. "Inference for Regression with Variables Generated from Unstructured Data," CESifo Working Paper Series 11119, CESifo.
    5. 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.
    6. Laura Battaglia & Timothy Christensen & Stephen Hansen & Szymon Sacher, 2024. "Inference for Regression with Variables Generated by AI or Machine Learning," Papers 2402.15585, arXiv.org, revised Apr 2025.
    7. Di Giacomo, Marina & Piacenza, Massimiliano & Salmasi, Luca & Turati, Gilberto, 2025. "Understanding labour productivity in maternity wards," Labour Economics, Elsevier, vol. 96(C).
    8. Wang, Xiaoxiao & Liang, Changyong, 2025. "Impact of family members’ perception bias on service strategies of elder care institutions," Socio-Economic Planning Sciences, Elsevier, vol. 98(C).
    9. 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.
    10. Walters, Christopher, 2024. "Empirical Bayes methods in labor economics," Handbook of Labor Economics,, Elsevier.
    11. Jessie Bruhn & Christopher Campos & Eric Chen, 2023. "Who Benefits from Remote Schooling? Self-Selection and Match Effects," Working Papers 2023-004, Brown University, Department of Economics.
    12. Tian Xie, 2025. "Automatic Inference for Value-Added Regressions," Papers 2503.19178, arXiv.org, revised Dec 2025.

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    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L8 - Industrial Organization - - Industry Studies: Services
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

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