Response to regulatory stringency: the case of antipsychotic medication use in nursing homes.

This paper studies the impact of regulatory stringency, as measured by the statewide deficiency citation rate over the past year, on the quality of care provided in a national sample of nursing homes from 2000 to 2005. The quality measure used is the proportion of residents who are using antipsychotic medication. Although the changing case-mix of nursing home residents accounts for some of the increase in the use of antipsychotics, we find that the use of antipsychotics by nursing homes is responsive to state regulatory enforcement in a manner consistent with the multitasking incentive problem. Specifically, the effect of the regulations is dependent on the degree of complementarity between the regulatory deficiency and the use of antipsychotics.