Mergers and Quality Provision in Healthcare: Evidence from Nursing Homes

This paper examines the impact of mergers between nursing home chains and independent facilities on quality of care, utilizing facility-level data from 1999–2019. Using a staggered difference-in-differences framework, we find that acquired facilities experience an 8% reduction in health deficiency citations in the three-year period post-merger. This effect persists for at least five years and is more pronounced in cross-market mergers, as well as mergers involving smaller or low-deficiency chains. Estimating a structural model suggests that this decline in deficiencies is driven by post-merger reductions in the marginal costs of serving residents. However, this cost efficiency is accompanied by a decline in direct care hours. Furthermore, the reduction in deficiencies is concentrated on low-severity categories, suggesting that mergers improve regulatory compliance rather than clinical outcomes. Consistently, we find no meaningful impact of mergers on residents’ health outcomes.