Abstract

Objective: The quality and cost of care in nursing homes and hospitals depends critically on the number and quality of nurses and other direct-care staff. Recent research suggests that the nursing supply adjusts to macroeconomic conditions. That is, as macroeconomic conditions worsen and unemployment rates rise, the number of nurses in the labor force increases as job opportunities diminish and nurses use their degree to re-enter the market. This observation has been used to explain why mortality decreases during economic recessions. However, prior work has failed to account for the effect of macroeconomic conditions on demand for direct-care staff through the effect on revenues. In this study, we test how local unemployment rates affect direct-care staffing rates in both nursing homes and hospitals.

Data: We use two main datasets. First, to measure direct-care staffing levels in California nursing homes and hospitals, we use annual financial data files from California’s Office of Statewide Health Planning and Development (OSHPD). Second, to measure county-level unemployment rates we use the Area Health Resources File (AHRF). We then confirm our findings in nursing homes across the United States, obtaining staffing data from the Online Survey and Certification Reporting (OSCAR) data set.

Methods: We exploit the wide variation in the unemployment rate within counties between 2001-2012 and use a longitudinal fixed-effects strategy to examine how the local unemployment rate affects direct-care staffing levels at nursing homes and hospitals. We analyze the effect of annual county-level unemployment rates on direct-care staffing levels using a linear model with facility and year fixed effects. Thus, identification relies on within-facility variation in our outcomes. We also test whether there are heterogeneous effects of unemployment rates by facility size, staffing level, and profit status.

Results: In California nursing homes we find that as unemployment rates increase, staffing by registered nurses (RNs) decreases but staffing by licensed practical nurses (LPNs) increases. The increase in LPNs is larger in small nursing homes, nursing homes with higher staffing levels, and in not-for-profit nursing homes. In California hospitals, on the other hand, we find no statistically significant effects of unemployment rates on staffing levels. When examining the effect of unemployment rates on net revenue, we find that higher unemployment rates is associated with lower but not statistically significantly different net revenue overall in both nursing homes and hospitals. In stratified regression in nursing homes, an increase in unemployment was associated with positive net revenue for small nursing homes, nursing homes with high staffing levels, and not-for-profit nursing home.

Implications: While the effect of macroeconomic conditions on nursing supply may be important for cost and quality of care, the mechanism is not simple, direct, or homogeneous for all types of nurses and providers. Additionally, the macroeconomy affects hospitals and nursing homes differently. This may be due to the fact that the demand for nursing home care is more sensitive to the economy than for acute care services because elderly have far more complete insurance for acute care.