The smart-seller challenge: The determinants and the outcomes of privatizing public nursing homes

Date of Award


Degree Type


Degree Name

Doctor of Philosophy (PhD)


Public Administration


Douglas A. Wolf


Divestment decision, Quality of care, Smart-seller challenge, Privatizing, Nursing homes

Subject Categories

Public Administration | Public Affairs, Public Policy and Public Administration | Social and Behavioral Sciences


Reassessment of the government's responsibilities in service delivery through privatization is one of the central issues in contemporary public administration research. This study focuses on two research questions: (1) What factors influence local governments' decisions to divest a county-owned nursing home? (2) What are the effects of privatization on the quality of care and Medicaid admissions in the privatized facilities? The first theoretical model suggests that the divestment decision is determined by a variety of fiscal, political, mission-related and institutional factors. The second model, focusing on the outcomes of divestment, hypothesizes that the ownership status of the privatized facilities determines the quality of care and access for Medicaid clients.

Both questions are analyzed using the Online Survey, Certification and Reporting 2004 file and other secondary data. For the first model, 107 divested homes and 252 non-divested county-owned homes are examined using logistic regression. The dependent variable, indicating whether the facility was divested between 1998 and 2003, was regressed on the pre-privatization measures of the divestment antecedents. In addition, two exploratory case studies were conducted. For the second model, post-privatization change in quality was studied using negative binomial regression, and the change-score regression was used to examine changes in Medicaid admissions.

This study is motivated by the concern that public facilities that play the safety-net role in their communities may be privatized as a result of increasing fiscal challenges. The analysis determines that county-owned facilities that are more likely to play the safety-net role are, in fact, less likely to be divested. Thus, counties operating their facilities in less competitive local markets refrain from privatization and sustain their important role in providing access to nursing home care for community residents. Furthermore, lower occupancy and poor condition of the physical environment in the county homes predict divestment. This research finds no substantial evidence on the effects of fiscal pressures on the privatization decision.

The analysis of privatization outcomes indicates that the change of ownership status to forprofit, on average, increases the number of regulatory violations. No such decline is found among nonprofit owners of the privatized facilities. This study also finds no evidence of decline in Medicaid admissions after privatization. The study concludes that if local governments have the opportunity to influence the sectoral composition of the local markets through privatization, then, from the quality of care perspective, a nonprofit owner appears to be a better choice.


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