Abstract
The implementation of regulation in the health care sector is often motivated by assuring a minimum level of quality, but there is little understanding of the cost of this regulation. This paper explores the cost of regulation in the nursing home industry. Using panel data on the same nursing homes from 1999 to 2004, this paper examines how financial performance is impacted by regulations that increased the minimum number of nurses that provide direct care to residents. While nursing homes attempt to increase revenues and mitigate the cost of responding to more stringent regulation, various measures of profitability show nursing homes are worse off financially. In fact, more stringent staffing regulations cause some nursing homes to lose money providing services.
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