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

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.

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.

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.

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.

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.