Nonprofit vs. for-profit : allocation of beds and access to care in U.S. nursing homes

Motivated by bed allocation patterns of U.S. nursing homes, we formulate a queueing network model to study nonprofit and for-profit nursing homes' bed allocation decisions and the resulting access to care for the public. Nursing homes have a fixed number of beds that can be allocated among three types: Medicare-dedicated beds (for the Medicare population only), Medicaid-dedicated beds (for the Medicaid population only), and flexible beds (for both populations). To distinguish between nonprofit and for-profit nursing homes, we incorporate altruism into a nonprofit nursing home's objective function to capture resident welfare. This model makes three theoretical predictions. First, it is generally optimal for nursing homes to have flexible beds and Medicare-dedicated beds, but not Medicaid-dedicated beds. Second, when the Medicaid arrival rate is sufficiently high, it is optimal for nonprofit nursing homes to have a higher proportion of Medicare-dedicated beds than their for-profit counterparts, thereby providing lower access to care for the Medicaid population. Third, when the Medicare arrival rate is sufficiently low, it is optimal for nonprofit nursing homes to have a lower proportion of Medicare-dedicated beds than their for-profit counterparts, thereby providing higher access to care for the Medicaid population. These predictions are supported by two empirical tests: (1) a cross-sectional analysis on U.S. nursing homes, (2) a difference-in-differences analysis on U.S. nursing home ownership conversions from nonprofit to for-profit. Our study shows that, contrary to public concerns, for-profit nursing homes can actually provide higher access to care for the Medicaid-covered population than their nonprofit counterparts