Shareholder Value and the Performance of a Large Nursing Home Chain

Objective. To analyze
corporate governance arrangements and quality and financial performance
outcomes among large multi-facility nursing home corporations (chains)
that pursue stakeholder value (profit maximization) strategies.

Study Design. To
establish a foundation of knowledge about the focal phenomenon and
processes, we conducted an historical (1993–2005) case study of one of
the largest chains (Sun Helathcare Inc.) that triangulated qualitative
and quantitative data sources.

Data Sources. Two main
sets of information were compared: (1) corporate sources including
Sun's Security Exchange Commission (SEC) Form 10-K annual reports,
industry financial reports, and the business press; and (2) external
sources including, legal documents, press reports, and publicly
available California facility cost reports and quality data.

Principal Findings. Shareholder
value was pursued at Sun through three inter-linked strategies: (1)
rapid growth through debt-financed mergers; (2) labor cost constraint
through low nurse staffing levels; and (3) a model of corporate
governance that views sanctions for fraud and poor quality as a cost of
business.

Conclusions. Study
findings and evidence from other large nursing home chains underscore
calls from the Institute of Medicine and other bodies for extended
oversight of the corporate governance and performance of large nursing
home chains.