Does information matter? Competition, quality, and the impact of nursing home report cards.

OBJECTIVE We evaluate the effects of the Nursing Home Quality Initiative (NHQI), which introduced quality measures to the Centers for Medicare and Medicaid Services' Nursing Home Compare website, on facility performance and consumer demand for services. DATA SOURCES The nursing home Minimum Data Set facility reports from 1999 to 2005 merged with facility-level data from the On-Line Survey, Certification, and Reporting System. STUDY DESIGN We rely on the staggered rollout of the report cards across pilot and nonpilot states to examine the effect of report cards on market share and quality of care. We also exploit differences in nursing home market competition at baseline to identify the impacts of the new information on nursing home quality. RESULTS The introduction of the NHQI was generally unrelated to facility quality and consumer demand. However, nursing homes facing greater competition improved their quality more than facilities in less competitive markets. CONCLUSIONS The lack of competition in many nursing home markets may help to explain why the NHQI report card effort had a minimal effect on nursing home quality. With the introduction of market-based reforms such as report cards, this result suggests policy makers must also consider market structure in efforts to improve nursing home performance.