Advertising expenditures in the nursing home sector: evaluating the need for and purpose of advertising

Abstract

Marketing and advertising activities in the nursing home sector have increased in recent years, following the example of hospitals and health systems. The reasons for this trend may be related to the growth in competition but are not clearly identified yet. Theoretically, advertising becomes necessary to gain an advantage over the competition. The purpose of this study was to identify the reasons for the variation in advertising expenditures among nursing homes in Texas. For this study, we merged 2003 data from the Texas Medicaid Nursing Facility Cost Report, the Texas Nursing Home Quality Reporting System, and the Area Resource File for Texas. Using the Herfindahl-Hirschman Index, we then examined the correlations between advertising expenses and the level of market concentration. We evaluated the association between advertising expenditures and market competition using two logistic and four linear regression models. Total advertising expenses in Texas nursing homes ranged from $0 to $165,000 per year. Higher advertising expenditures were associated with larger facilities, higher occupancy, and high Medicare census. Market competition, however, was not a significant predictor of such expenses. Advertising seems to be more resource-driven than market-driven. Therefore, some advertising expenditures may be unnecessary, may lack impact, and may even be wasteful. Reducing unnecessary advertising costs could free up resources, which may be allocated to necessary resident care activities.