The Effects of Competition on Community-Based Nursing Wages

Abstract

In 1997, Ontario implemented a competitive bidding process for purchasing home care services, with the twin objectives of lowering costs and increasing service quality. The authors of this study performed regression analyses to ascertain the relationship between measures of competition, profit status of providers and nursing wages for community-based RNs and LPNs between 1995/1996 and 2000/2001. Using the Herfindahl-Hirschman Index as a measure of competition, we observed that only RN wages significantly increased as competition in home care increased. Furthermore, for-profit agencies paid significantly lower RN wages than their not-for-profit counterparts. By contrast, LPN wages declined over the sample period and did not differ markedly across provider types. The relative distribution of for-profit and not-for-profit agencies changed dramatically over the study period, with large increases in the number and volume of for-profit contracts. The results indicate that (a) greater competition in the home care sector resulted in upward pressure on RN wages independent of the profit status of the provider and (b) the increase appears to have been constrained by the increased presence of for-profit providers over the study period. The results highlight the role of profit status in provider behaviour, even in the context of publicly funded home care services. This finding has implications for both provider mix and the remuneration of nurses.