Ownership, quality and prices of nursing homes in Australia: Why greater private sector participation did not improve performance. Issue 11 (November 2021) - Yong, Jongsay
Highlights: Market-oriented reforms have been introduced in Australian aged care since 2013. We examine whether greater private-sector participation results in better outcomes. We find government-owned facilities provide higher quality and charge lower prices. Without addressing market failures, greater private-sector participation does not yield superior outcomes. Abstract: Objective: This study examines whether greater private-sector participation in aged care can lead to better outcomes by comparing quality of care and prices of residential aged care facilities across three ownership types: government-owned, private not-for-profit and for- profit facilities. Australia, like many other countries, has been implementing market-oriented reforms aiming to promote greater consumer choice and increase the role of markets and private-sector participation in aged care. Methods: Using retrospective facility-level data, the study relates several measures of quality of care and a measure of price to ownership types while controlling for facility characteristics. The data covered six financial years (2013/14–2018/19) and contained 2, 900 residential aged-care facilities, capturing almost all facilities in Australia. About 55% were private not-for-profit, 30% private for-profit and 15% government-owned. Results: Government-owned facilities provide higher quality of care in most quality measures and charge the lowest average price than private for-profit and not-for-profit facilities. Discussion: Reforms promoting private-sector participation in aged care are unlikely to result in effective competition to drive quality up or prices down unless sources of market failure are addressed. In Australia, the lack of public reporting of quality and the complex pricing structure are key issues that prevent market forces and consumer choice from working as intended.