Medicare skilled nursing facilities' occupancy and payer source: The moderating role of financial performance

While extensive research has focused on patient outcomes in skilled nursing facilities, a critical gap remains in understanding factors influencing their managerial performance, particularly occupancy rates. This study examines the occupancy rates of skilled nursing facilities and assesses the significance of two important drivers of managerial performance that have not received sufficient attention-the influence of payer mix and total profit margin. Specifically, we focused on the role played by a nursing home's financial performance (as assessed by profit margin) in influencing the relationship between payer mix and occupancy rate among skilled nursing facilities.

Data were extracted from the 2019 to 2020 Joint Annual Report of Nursing Homes for a sample of 612 skilled nursing facilities in Tennessee, USA. Regression analysis was performed by fitting a generalized estimating equation of occupancy rate.

Compared to skilled nursing facilities in the lowest quartile of profit margin, for example, those in the highest quartile had approximately 18 percentage points higher occupancy rates per unit increase in resident days of care covered by traditional Medicare (β = 0.18, p = 0.0028). Similarly, skilled nursing facilities in the second highest quartile of profit margin had a higher occupancy rate by approximately 23 percentage points per unit increase in Medicare Advantage (β = 0.23, p = 0.0375) when compared to those in the lowest quartile of profit margin.

Skilled nursing facilities with stronger financial performance generally have higher occupancy rates, particularly notable in relation to an upswing in payer sources such as traditional Medicare and Medicare Advantage, when compared to skilled nursing facilities with weaker profitability. Given the increasingly larger role of Medicare in long-term care funding, policymakers and nursing home managers may find it useful to consider our findings when evaluating opportunities to enhance managerial performance of skilled nursing facilities.