Nursing Home Competition, Prices, and Quality: A Scoping Review and Policy Lessons

In recent years, countries have increasingly relied on markets to improve efficiency, contain costs, and maintain quality in aged care. Under the right conditions, competition can spur providers to compete by offering better prices and higher quality of services. However, in aged care, market failures can be extensive. Information about prices and quality may not be readily available and search costs can be high. This study undertakes a scoping review on competition in the nursing home sector, with an emphasis on empirical evidence in relation to how competition affects prices and quality of care.

Online databases were used to identify studies published in the English language between 1988 and 2020. A total of 50 studies covering 9 countries are reviewed.

The review finds conflicting evidence on the relationship between competition and quality. Some studies find greater competition leading to higher quality, others find the opposite. Institutional features such as the presence of binding supply restrictions on nursing homes and public reporting of quality information are important considerations. Most studies find greater competition tends to result in lower prices, although the effect is small.

The literature offers several key policy lessons, including the relationship between supply restrictions and quality, which has implications on whether increasing subsidies can result in higher quality and the importance of price transparency and public reporting of quality.