Nursing home financial performance: The role of ownership and chain affiliation

Academic Article

Abstract

  • Background: The nursing home industry serves one of the most vulnerable populations, and its financial sustainability is a matter of public concern. However, limited empirical evidence exists on the impact of ownership and chain affiliation on nursing home financial performance. Purposes: The aim of this study was to examine the joint effects of ownership and chain affiliation on the financial performance of the nursing home industry for the study period 1999-2004 on a national sample of 11,236 nursing homes per year. Methodology/Approach: Data included the Medicare Cost Reports; the Online Survey, Certification, and Reporting file; and the Area Resource File. Dependent variables included operating and total margins. Independent variables included four ownership/chain affiliation combinations: for-profit chain, for-profit independent, not-for-profit chain, and not-for-profit independent. Random effects generalized least square regressions were performed. Findings: Results show that for-profit nursing homes delivered better financial performance than not-for-profit facilities did across both operating and total margins. However, the relationship between chain affiliation and financial performance was more nuanced. In the case of operating margin, chain-affiliated facilities delivered superior financial performance irrespective of ownership type; however, in the case of total margin, independents outperformed chain-affiliated facilities among for-profits. Practice Implications: Our findings show an interactive effect of ownership and chain affiliation on nursing home financial performance, suggesting the pursuit of different organizational strategies by different ownership/chain affiliation subgroups (for-profit chain, for-profit independent, not-for-profit chain, and not-for-profit independent), with implications for financial performance. For-profit independent nursing homes managed to be the top performing group in terms of overall financial despite the operating financial advantage of for-profit chain-affiliated nursing homes. Similarly, not-for-profit independent nursing homes and not-for-profit chain homes had comparable overall financial performance despite the operating financial advantage of chain homes. Copyright © 2012 Wolters Kluwer Health | Lippincott Williams & Wilkins.
  • Published In

    Digital Object Identifier (doi)

    Author List

  • Weech-Maldonado R; Laberge A; Pradhan R; Johnson CE; Yang Z; Hyer K
  • Start Page

  • 235
  • End Page

  • 245
  • Volume

  • 37
  • Issue

  • 3