Managerial Ownership in Nursing Homes: Staffing, Quality, and Financial Performance.

Abstract

Ownership of nursing homes (NHs) has primarily focused broadly on differences between for-profit (FP), nonprofit (NFP), and government-operated facilities. Yet, among FPs, the understanding of detailed ownership structures at individual NHs is rather limited. Particularly, NH administrators may hold significant equity interests in their facilities, leading to heterogeneous financial incentives and NH outcomes. Through the principal-agent theory, this article studies how managerial ownership of individual facilities affects NH outcomes. We use a unique panel dataset of Ohio NHs (2005-2010) to empirically examine the relationship between managerial equity ownership and NH staffing, quality, and financial performance. We identify facility administrators as owner-managers if they have more than 5% of the equity stakes or are relatives of the owners. The statistical analysis is based on the pooled ordinary least squares and NH-fixed effect models. We find that owner-managed NHs are associated with higher nursing staff levels compared to other FP NHs. Surprisingly, despite higher staffing levels, owner-managed NHs are not associated with better quality and we find no statistically significant difference in financial performance between owner-managed and nonowner-managed FP NHs. Our results do not support the principal-agent model and we offer alternative explanations for future research. Our findings provide empirical evidence that NH ownership structures are more nuanced than simply broadly categorizing facilities as FP or NFP, and our results do not fully align with the standard principal-agent model. The role of managerial ownership should be considered in future NH research and policy discussions.