Strategic groups, performance, and strategic response in the nursing home industry

This study examines the effect of strategic group membership on nursing home performance and strategic behavior. Data from the 1987 Medicare and Medicaid Automated Certification Survey were combined with data from the 1987 and 1989 Pennsylvania Long Term Care Facility Questionnaire. The sample consisted of 383 Pennsylvania nursing homes. Cluster analysis was used to place the 383 nursing homes into strategic groups on the basis of variables measuring scope and resource deployment. Performance was measured by indicators of the quality of nursing home care (rates of pressure ulcers, catheterization, and restraint usage) and efficiency in services provision. Changes in Medicare participation after passage of the 1988 Medicare Catastrophic Coverage Act (MCCA) measured strategic behavior. MANOVA and Turkey HSD post hoc means tests determined if significant differences were associated with strategic group membership. Cluster analysis produced an optimal seven-group solution. Differences in group means were significant for the clustering, performance, and conduct variables (p < .0001). Strategic groups characterized by facilities providing a continuum of care services had the best patient care outcomes. The most efficient groups were characterized by facilities with high Medicare census. While all strategic groups increased Medicare census following passage of the MCCA, those dominated by for-profits had the greatest increases. Our analysis demonstrates that strategic orientation influences nursing home response to regulatory initiatives, a factor that should be recognized in policy formation directed at nursing home reform.