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PRODUCING HEALTH: MEASURING VALUE ADDED OF NURSING HOMES.
Liran Einav1, Amy Finkelstein2, Neale Mahoney1
1Department of Economics, Stanford University and NBER.
Econometrica : Journal of the Econometric Society
|June 26, 2026
Summary
This study introduces a new model to measure nursing home quality, accounting for patient selection. Results show significant quality differences, suggesting patient reallocation could improve care.
Area of Science:
- Health Services Research
- Econometrics
- Gerontology
Background:
- Skilled Nursing Facilities (SNFs) play a crucial role in post-acute care.
- Estimating SNF quality is complex due to patient selection biases.
- Existing quality measures may not accurately reflect true SNF performance.
Purpose of the Study:
- To develop and apply a value-added model for SNFs that corrects for patient selection.
- To quantify the heterogeneity in SNF quality across the United States.
- To identify potential gains from improving patient allocation to higher-quality SNFs.
Main Methods:
- Developed a stylized econometric model to estimate SNF value-added.
- Utilized comprehensive Medicare data (2011-2016) for approximately 6 million SNF patients.
- Analyzed physical and mental health data to assess patient outcomes.
Main Results:
- Significant variation in SNF value-added was observed nationwide.
- Higher-performing SNFs (90th percentile) discharge patients faster than lower-performing SNFs (10th percentile).
- Quality variation within local markets is substantial, nearly matching national disparities.
Conclusions:
- SNF quality varies significantly, impacting patient outcomes and length of stay.
- Policies promoting within-market patient reallocation to higher-quality SNFs could yield substantial improvements.
- The developed value-added measure offers a more accurate assessment of SNF performance.
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