Nursing Home Quality and Financial Performance: Is There a Business Case for Quality?

Abstract

This study examines the relationship between nursing home quality and financial performance to assess whether there is a business case for quality. Secondary data sources included the Online Survey Certification and Reporting (OSCAR), Certification and Survey Provider Enhanced Reporting (CASPER), Medicare Cost Reports, Minimum Data Set (MDS 2.0), Area Resource File (ARF), and LTCFocus for all free-standing, nongovernment nursing homes for 2000 to 2014. Data were analyzed using panel data linear regression with facility and year fixed effects. The dependent variable, financial performance, consisted of the operating margin. The independent variables comprised nursing home quality measures that capture the three dimensions of Donabedian’s structure-process-outcomes framework: structure Registered Nurse (RN) hours per resident day, Licensed Practical Nurse (LPN) hours per resident day, Certified Nursing Assistant (CNA) hours per resident day, RN skill mix), process (facility-acquired restraints, facility-acquired catheters, pressure ulcer prevention, and restorative ambulation), and outcomes (facility-acquired contractures, facility-acquired pressure ulcers, hospitalizations per resident, rehospitalizations, and health deficiencies). Control variables included size, average acuity index, market competition, per capita income, and Medicare Advantage penetration rate. This study found that the operating margin was lower in nursing homes that reported higher LPN hours per resident day and higher RN skill mix (structure); higher use of catheters, lower pressure ulcer prevention, and lower restorative ambulation (process); and more residents with contractures, pressure ulcers, hospitalizations and health deficiencies (outcomes). The results suggest that there is a business case for quality, whereas nursing homes that have better processes and outcomes of care perform better financially.

Shortages of Staff in Nursing Homes During the COVID-19 Pandemic: What are the Driving Factors?

“…Even before the pandemic, NHs were reliant on higher margin Medicare residents to provide financial cushion to invest in staff and quality. 42 Indeed, NHs with higher Medicare prevalence were less likely to suffer staff shortages. Securing the financial health of NHs that allows them to address these staff shortages needs to be a priority that might help NHs ensure that fewer residents are exposed to COVID-19.…”

Nursing Home Profit Margins and Citations for Infection Prevention and Control

“…16 Another study found that investing in quality is profitable for nursing homes. 22 There is also evidence that nursing homes that perform better in terms of health outcomes such as pressure ulcers are able to lower costs and ultimately improve their profit margins. 23 Our findings have important implications for policy.…”

What Counts in Nursing Homes’ Quality and Efficiency? Results From Data Envelopment Analysis in Italy

“…As Weech-Maldonado et al 26 noted, improved quality in NHs, achieved through innovative or efficient care processes, may result in fewer defects and/or avoidable complications, which, in turn, will lower the amount of waste or rework, thereby reducing the costs of delivering care. However, there is the need of a detailed understanding of the relationship between quality and efficiency performance due to the twin challenge of delivering high-quality care while retaining efficiency sustainability.…”