When contracts fail: The response of skilled nursing facilities to changes in government fiscal policy in the 1990's

This dissertation is an exploratory study of how nonprofits operating in a largely for-profit service sector whose major consumer is the federal government respond to changes in federal fiscal policy.;Nonprofit organizations deliver a range of public goods in our society and are an important facet of our overall delivery of services to populations in need, sometimes complementing, sometimes substituting for the delivery of these goods by governmental or private sector organizations. The privileged tax status of nonprofit organizations is premised in large part on the assumption that, when profit maximization is not their goal, organizations can fulfill public missions of equity and quality unlike profit-oriented organizations.;I examine the nursing home industry, a largely proprietary industry with a significant nonprofit sector. The federal fiscal policy whose effects I assess is the Prospective Payment System (PPS).;Based on a 1996 study that found no difference between nonprofits and for-profits in nursing homes relative to implementing management controls after the introduction of PPS, I hypothesis that there is no significant difference between nonprofits and for-profits after PPS in the way they respond to factors that determine RUG scores which consequently change per-diem rates. I also question whether and to what extent influencing these factors can affect the admission policy of the nursing homes and if this presents a contract failure between the nonprofits and the IRS.;I answer this question using a resampling hypothesis test with several dependent variables and a one two-level independent variable: nonprofit and for-profit nursing homes. I then follow up with a discriminant analysis to determine if the dependent variables can predict the classification of the two independent groups.;The data shows mixed results. Nonprofits behave the same as for-profits to influence some factors but not others. The results are discussed and an explanation of these outcomes is offered.;This study supports the case for continued public administration research to accomplish two goals: (1) to keep the responses of organizations in both sectors in check when facing fiscal policy changes; and (2) to inform policy makers of the potential unintended consequences of fiscal policy changes that arbitrarily expand the breadth of each sector.