Is the Quality of Nursing Homes Countercyclical? Evidence from 2001 Through 2015

Background and Objectives: To examine whether nursing homes (NHs) provide better quality when unemployment rates rise (countercyclical) and explore mechanisms contributing to the relationship between quality and unemployment rates. Research Design and Methods: The study uses the data on privately owned, freestanding NHs in the continental United States that span a period from 2001 through 2015. The empirical analysis relies on panel fixed-effect regressions with the key independent variable being the county-level unemployment rate. NH quality is measured using deficiencies, outcomes, and care process measures. We also examine nursing staff levels, as well as employee turnover and retention. Results: NHs have better quality when unemployment rates increase. Higher unemployment rates are associated with fewer deficiencies and lower deficiency scores. This countercyclical relationship is also found among other quality measures. In terms of mechanisms, we find higher nursing staff levels, lower employee turnover, and better workforce retention when unemployment rates rise. Improvement in staffing is likely contributing to better quality during recessions. Interestingly, these effects predominately occur in for-profit NHs for deficiencies and staffing levels. Discussions and Implications: NH quality is countercyclical. With near record-low unemployment rates in 2018, regulatory agencies should pay close attention to NH quality when and where the local economy registers strong growth. On the other hand, the finding of the unemployment rate-staffing/turnover relationship also suggests that policies increasing staffing and reducing employee turnover may not only improve NH quality but also have the potential to smooth quality fluctuations between business cycles.