Determinants of nursing home choice: Does reported quality matter?

Quality report cards addressing information asymmetry in the health care market have become a popular strategy used by policymakers to improve the quality of care for older people. Using individual level data from the largest German sickness fund merged with institutional level data, we examine the relationship between reported nursing home quality, as measured by recently introduced report cards, nursing home prices, nursing home's location, and the individual choice of nursing homes. Report cards were stepwise introduced as of 2009, and we use a sample of 2010 that includes both homes that had been evaluated at that time and that had not yet been. Thus, we can distinguish between institutions with above and below average ratings as well as nonrated nursing homes. We find that the probability of choosing a nursing home decreases in distance and price. However, we find no economically significant effect of reported quality on individuals' choice of nursing homes.