Profit incentives and technical efficiency in the production of nursing home care

In recent years, nursing home care expenditures have approached 1% of GNP. Their growth is a major contributor to the escalating costs of health care. In this article, we analyze a sample of nursing homes from Wisconsin to determine the characteristics of the efficiently operated nursing homes. Data envelopment analysis is used to calculate efficiency scores for the various nursing homes in the sample. We then use regression analysis to investigate the determinants of efficiency, holding constant the characteristics of the output. We find that for-profit firms have significantly higher efficiency scores.