Examination of nursing home financial distress via Porter’s five competitive forces framework

Abstract

Background Nursing homes face increased risk of closure because of poor financial performance. Purpose Using resource dependency theory, Porter’s Five Forces of Competition framework, and Altman’s Z-score model, this study examines the relationship between market factors and nursing home financial distress. Methodology/Approach This study utilizes Medicare Cost Reports, LTCFocus, Certification and Survey Provider Enhanced Reporting, Online Survey Certification and Reporting, and the Area Health Resource File to examine an average of 10,454 nursing homes per year from 2000 to 2015. Using Porter’s framework, market factors were conceptualized as the bargaining power of buyers and suppliers, threat of substitutes and new entrants, and industry rivalry. Organizational control variables include occupancy, payer mix, size, and chain affiliation. Data were analyzed using multinomial logistic regression with robust clustering, year, and state fixed effects. Results Distressed nursing homes (Relative Risk Ratios [RRR] = 0.991) were less likely to be in counties with higher Medicaid concentration. Distressed (RRR = 0.717) and at-risk-of-distress nursing homes (RRR = 0.807) were less likely to be in markets with home health agencies, and nursing homes at risk of distress (RRR = 1.005) were more likely to be in markets with a higher number of hospital-based skilled nursing facility beds compared to healthy organizations. The organizational-level variables, occupancy, payer mix, size, and chain affiliation had a significant impact on nursing home financial distress. Conclusions The effects of external market forces on nursing home financial distress were limited; however, organizational-level variables had a significant impact on nursing home financial distress. Practical Implications Study findings can inform policy makers on specific factors associated with nursing home financial distress and provide greater insight as it relates to designing new policies and interventions.

The Competitive Situation of the Cheminformatics Industry Based on Porter’s Model in Iran

“…The Weighting of the Subcriteria Related to Each of the Forces. The results of Zhao's research are in line with the results of the present study and confirm it Lord et al (2021). concluded that the impact of foreign market forces on the financial problems of nursing homes is limited, but organizational level variables have a significant effect on these problems.…”

“…The results of Zhao’s research are in line with the results of the present study and confirm it. Lord et al (2021) concluded that the impact of foreign market forces on the financial problems of nursing homes is limited, but organizational level variables have a significant effect on these problems. Similarly, the results of the present study show that due to the conditions of economic sanctions in the study population, foreign market forces are not colored, and unlike the results of research by Lord et al (2021), organizational level variables in this market are weak.…”

“…The results of this study showed that these six dimensions should be promoted in order of priority: company strategy, structure and competition, demand conditions, chance or opportunity, operating conditions, and finally related or supporting industries. Lord et al (2021), in addition to using resource dependency theory and Altman's Z score model, use Porter's competitive model and his five forces. Using these methods, they have examined the relationship between market factors and the financial distress of a nursing home.…”

Nursing Homes: Affiliation to Large Chains, Quality and Public–Private Collaboration

“…The affiliation of for-profit NHs with chains has been addressed in the literature that analyses the performance of NHs, especially in relation to financial performance [ 11 , 14 , 15 , 16 ] and, to a lesser extent, in relation to quality [ 12 , 17 , 18 ].…”

“…Moreover, in recent decades, there has been an increase in the growth of chain affiliation in the NH industry [ 11 ]. The affiliation of for-profit NHs with chains has been addressed in the literature that analyses the performance of NHs, especially in relation to financial performance [ 11 , 14 , 15 , 16 ] and, to a lesser extent, in relation to quality [ 12 , 17 , 18 ]. Belonging to a chain allows the standardisation of certain care processes, which can contribute to improving [ 19 ] or worsening the quality [ 17 ].…”