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Market Structure and Quality of Service: Investigating Oligopolies and the Quality of Nursing Home Care in California During The COVID-19 Pandemic

Student Name: Tessa Ireton
Major: Economics
Advisor: Dr. Brooke Krause
Quality-of-service outcomes in nursing homes are of great social and human importance. However, especially during the COVID-19 pandemic, consistently maintaining markets with high quality care has been a pervading issue in the American nursing home industry. Furthermore, the industry is strongly characterized by oligopolies, a market structure that literature indicates may be less compatible with quality service than competitive markets. With this paper, I aim to investigate the possible intersection of oligopolist market structures and the quality of nursing home care during the COVID-19 pandemic. I start by describing quality of care in nursing homes, particularly during the COVID-19 pandemic, contextualized by literature analyzing nursing home care quality and market structure. Then, I develop a model of profit-maximizing nursing home behavior using theories of oligopolist decision-making, rooted in the basis provided by both Cournot and Bertrand, informed by contemporary models describing the nursing home market. This model demonstrates an opposite correlation between the numberof firms in a market and the quality of nursing home care. To test this prediction, I construct a 26-week panel dataset including nursing home attributes and facilities™ experiences with COVID-19, using data from California™s Agency of Health and Human Services, the California Department of Public Health, the Census Bureau, and the Centers for Medicare and Medicaid Services. Random effects and Hausman-Taylor estimations test the relationship between the number of nursing homes in a market and the outcome of COVID-19 outbreaks in nursing homes, a proxy for quality of care during the pandemic. The results indicate that market structure is not explanatory in understanding differences in quality of nursing home care during the COVID-19 pandemic.

Tessa will be online to field comments on April 16:
2-4 pm EDT (PST 11am-1pm, Africa/Europe: evening)

Posted in I.S. Symposium 2021, Independent Study on March 25, 2021.