Determinants of nursing home costs in Florida: policy implications and support in national research findings

Descriptive and econometric analysis of the major nonquality determinants of nursing home costs for Florida shows that mean costs, size, and occupancy rate increased between 1971 and 1976, that per diem costs and occupancy rate were inversely related, and that the per diem cost was lower in rural than in urban areas. Regression of the data shows that--next to inflation, as expressed by the Consumer Price Index--the occupancy rate accounts for most of the variation in per diem costs, followed by size, urban-rural location, and by type of control. The hypothetical "optimal," defined as lowest cost-size range, was calculated to be more than 350 beds. Recent research substantiates most of these findings. Medicaid Cost Reports from Florida's nursing homes were the source of the information analyzed; by 1976, the sixth year of the study, the data base covered nearly 9 of 10 licensed beds in the State. Some policy implications can be drawn from the analysis. Reductions in per diem costs could be achieved by higher occupancy rates, especially in the larger nursing homes, and a reduction in the rate of inflation would reduce the rate of increase in nursing home costs.