Because of the aging trend in Taiwan, long‐term care plays an important role in the medical system. Finding ways to ensure medical and service quality in long‐term care facilities requires immediate attention. This study discusses service quality in nursing homes and the factors that affect service quality in Taiwan in a way that benefits the management of these organizations. Using a refined Kano model analysis, 12 high value‐added qualities, 4 low value‐added qualities, 1 critical quality, 6 required qualities, 1 potential quality, and 2 care‐free qualities were found. Furthermore, using a combination of quality function deployment and Grey relational analysis (GRA), it was found that medical service standards of the nursing homes require improvement. Items such as “educational training,'' “professional capability,” “degree of understanding patients,” “communication skills,” and “crisis management ability” were provided by an equal‐weight GRA. The improvement sequence was “educational training,” “professional capability,” “communication skills,” “understanding of patients,” and “crisis management ability” in an equal‐weight quantified GRA. The research results can provide nursing homes with an improvement sequence for service design and operational management. © 2012 Wiley Periodicals, Inc.