Effects of Nursing Home Closures on Occupancy and Finances of Nearby Nursing Homes

Abstract

This study estimates the effect of nursing home closure on occupancy, net profit margin, and operating margin of nearby nursing homes. We use national nursing home data from 2009 to 2019 from Medicare cost reports, Medicare Provider of Services (POS), and LTCfocus.org data. Using the Callaway and Sant’Anna difference-in-differences model, we compare the changes in occupancy, net profit margin, and operating margin between incumbent nursing homes in markets with any closure and nursing homes in markets without a closure, overall, and across rurality. Our findings suggest that nursing home closure improves the occupancy rates of remaining nursing homes in the same market in rural areas but there is little evidence of effects in metropolitan and micropolitan areas. Nursing home regulators and local officials should consider the long-term care market heterogeneity when considering interventions targeted at nursing home closure.