Executive Summary: In this article, we estimate X-efficiency levels in the nursing home industry and investigate the impact of their profit status and chain affiliation on performance. Using a Bayesian stochastic frontier approach and a nation-wide data set, we find that nursing homes are relatively cost inefficient. We also find strong evidence that chain affiliations and nonprofit status reduce a firm's operational cost efficiency. Finding that chain-affiliated homes are less cost efficient than independent homes casts concerns on the industry in light of the recent growth in chain affiliations.
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Anderson et al. (1999) studied this question.
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