Do Social Media Dominate Government Report Cards in Influencing Nursing Home Demand?

Abstract

Social media have emerged as innovative channels to disseminate quality information to consumers in a variety of service settings. Their influence has recently spread to healthcare services, for which government report cards have long been established to disclose standardized quality information to the public. Given the presence of government report cards, do social media affect consumer demand of healthcare services? If so, which quality information channel has a stronger effect? We seek to answer these questions in the context of U.S. nursing homes by studying consumer ratings on Yelp and government ratings on Nursing Home Compare, both of which adopt a five-star quality rating scale and are accessible on the Internet. We apply the method of difference-in-differences with continuous treatment intensity and instrumental variables to conduct our analysis. Using nursing home resident admissions as the proxy for consumer demand, we find that higher Yelp ratings positively influenced consumer demand, particularly the demand of Medicare-covered consumers. Furthermore, Yelp ratings exerted a stronger effect on consumer demand than government ratings. This dominance of Yelp ratings over government ratings was stronger in markets with higher Yelp penetration or markets with lower consumer education level. Although higher Yelp ratings were associated with increased net incomes and total margins, we find little evidence that nursing homes made quality improvement in response to their Yelp ratings.