Organizational Ownership and Service Quality

A nursing home includes a mixture of for-profit, nonprofit, and government-owned organizations as service providers. These organizations compete with each other to provide a better service quality. Thus, the nursing home service provides a good domain in which to compare the relative quality of services provided by these three different organizational ownerships. The existing empirical literature on the effect of ownership type on nursing home quality has suffered from lack of a theoretical framework and a systematic comparison of their relationship. This study addresses these gaps in the literature by providing a structure, process, and environment (SPE) framework and by comparing the relative influences of different organizational ownerships on nursing home quality. The data for this study was obtained from the Online Survey Certification Reporting (OSCAR) system database, the Minimum Data Set (MDS) repository, and the Centers for Medicare & Medicaid Services (CMS). Thirteen thousand six hundred eleven nursing homes were finally used for analysis after the data was cleaned. Based on theoretical knowledge of organizational ownership and literature reviews on the relationships between ownership type and nursing home quality, I developed 16 hypotheses and tested them with multiple regression models and linear structural equation models. The key findings of this study are that the SPE framework provides a useful tool for explaining nursing home quality, and nonprofit nursing homes have a higher quality than for-profit nursing homes in a regression analysis measured by a dummy variable. In particular, nonprofit nursing homes have a stronger influence on environmental factors than for-profit nursing homes. But, the nonprofit nursing homes do not have superiority to the for-profit nursing homes in process factors measured by nursing care deficiencies and physical restraints. Considering that these process factors lead to improve service quality through adequate nursing care, effective strategies of nonprofit nursing homes for improving the process factors are required. This study also examines the influence of nonprofit nursing homes on for-profit and overall nursing home quality by investigating an increase in nonprofit market share. As a result, the study finds that the increase in the nonprofit market share has a positive effect on both for-profit and overall nursing home quality. This result implies that a competitive spillover effect from the nonprofits leads to higher quality by encouraging the service improvement of for-profit nursing homes. As another significant finding, this study concludes that there are positive and negative effects of intersectoral competition among different organizational ownerships. While such competition has a beneficial effect on service quality by facilitating a profit motive in for-profit nursing homes, excessive competition may weaken nonprofits' ability to serve a socially-beneficial role in nursing home services. As a result, market competition does not always have a positive effect on service quality. Its effect is varied by different organizational ownerships and different service types provided. This study has some limitations. First, the study measures nursing home quality with three quality measures: pressure sores, bladder or bowel incontinence, and urinary tract infections. But, it does not seem that they provide a comprehensive set of quality measures. Considering that the effect of organizational ownership on service quality produces different results with different quality measures, the selection of such comprehensive quality measures by some clear criteria would be necessary to understand fully the relationship between organizational ownership and nursing home quality. Second, this study examines the relationship between organizational ownership and quality with a nursing home service. While major findings of the study have important implications, it does not seem appropriate to apply these findings to all health care services. The nursing home industry may be less relevant for understanding broader trends in the health-care sector. Thus, future research needs to explore how the effect of organizational ownership is varied by different service areas such as economic services, social services, and health care services.