Regulatory response to variations in the supply of nursing home beds.

Current regulatory practice seeks to reduce the supply of nursing home beds in areas that rank high in number of beds per capita. The presumption is that a high rank signals "overbedding," i.e., an excess of beds over need. A model of service use is employed to interpret data on the appropriateness of skilled nursing facility (SNF) utilization by Medicaid patients. The analysis reveals that beds per capita is a poor indicator of the relative probability that an area is overbedded, and suggests a more discriminating response to variations in the supply of SNF beds.