Capital maintenance and equity erosion in the nursing home industry: a study in one state

Federal contingencies charge states to regulate the reimbursement of the nursing home industry such that government reimbursement is at a minimal cost that reflects efficient operations, yet at amounts great enough to allow viability and ability to attract and maintain the investment of capital. This study discusses the regulation of the nursing home industry in terms of the significance and costs of financial capital, and the constraints imposed upon states as regulators of capital reimbursement policies. Descriptive financial profiles of nursing homes are provided in one state where the industry alleges inadequacies in the capital reimbursement formula. These financial profiles suggest that the nursing homes investigated have not been able to provide for capital maintenance; instead, the industry may be suffering from equity erosion. Also, the descriptive profiles of capital structure in the nursing home industry differ across three major segments--county, not-for-profit and proprietary homes.