Value and nursing home profitability

Abstract

Background Nursing homes in the United States are being challenged to demonstrate the value of the care they deliver. While quality and financial benefits of increasing the value of specific services accrue to nursing home residents and payers, an important unanswered question is whether producing high-value services produces financial benefits for the nursing home. Aim This paper examines whether offering high-value services to self-pay long-term care residents is associated with the nursing home’s profitability. Self-pay residents are an important market for nursing homes (29% of revenues) and one where nursing homes have pricing discretion. Methodology A multivariate regression model is estimated. Data for the study come from a unique database of per diem prices for self-pay long-term care services for Virginia nursing homes in 2011 combined with five star quality ratings from the Centers for Medicare and Medicaid Services Nursing Home Compare website. Results Offering high-value long-term care services is unrelated to operating or total margin of nursing homes. Conclusions Nursing homes can offer services to long-term care self-pay residents that are of higher quality and/or have a lower price for than other nursing homes without putting profitability at risk.