Ruhr Economic Papers

Ruhr Economic Papers #788

Paying for the View? How Nursing Home Prices Affect Quality of Care

by Dörte Heger, Annika Herr and Anne Mensen

RUB, RWI, 12/2018, 22 S./p., 8 Euro, ISBN 978-3-86788-916-2 DOI: 10.4419/86788916

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Abstract

Increasing long-term care demand raises the need of high quality care in nursing
homes. This study analyses whether higher prices have a causal effect on quality of
care in Swiss nursing homes and assesses the extent of cross-subsidization between
different price components. We use administrative data collected by the Swiss Federal
Office for Statistics from 2012 to 2016 on all nursing homes in the twelve Swiss cantons
with canton-wide fixed reimbursement rates for nursing care. We apply multivariate
linear regressions and two-stage least square estimation techniques to estimate the
effect of nursing care prices and prices for accommodation and services on care quality,
measured by registered staffing levels. Our estimates show a positive impact of all price
components on care quality. Although nursing homes are prohibited to use revenues
from accommodation and services to cover nursing care, a 10% increase in that price
component increases certified staffing levels by 0.7 to 1.7 nurses or four to ten percent
(full-time-equivalent) for an average sized nursing home (50 beds). Thus, limiting care
prices implicitly sets a limit for care quality and induces care providers to pass on costs
to the residents.

JEL-Classification: I11, I18, J18

Keywords: Long-term care; nursing home; prices; care quality; staffing levels

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