Contact: Richard Mollot, 212-385-0356, richard@ltccc.org
December 21, 2023 – For decades, the U.S. nursing home industry has blamed inadequate funding for failures to provide sufficient staffing and services to meet the needs of vulnerable residents. This strategy, powered by multimillion dollar lobby associations on both the federal and state levels, has been extremely successful: nursing homes are rarely held accountable for substandard care, even when residents suffer, and the services provided are deemed worthless.
However, in fact, little is known about nursing home finances beyond the unvalidated figures that facilities self-report to the government. Though the industry claims razor-thin margins, private equity firms, real estate investment trusts, and other sophisticated investors have increasingly invested in the sector, belying claims that profits are low.
To address this knowledge gap, LTCCC partnered with researchers to undertake a study of nursing home financing and profitability. The resulting study, “United States’ Nursing Home Finances: Spending, Profitability, and Capital Structure,” has been published in the International Journal of Social Determinants of Health and Health Services. The study used 2019 Medicare cost reports to examine nursing home revenues, expenditures, net income, related-party expenses, expense categories, and capital structure.
Key Findings:
- Nursing homes had total net revenues of $126 billion and a profit of $730 million (0.58%) in 2019.
- However, when excluding $6.4 billion in disallowed costs and $3.9 billion in non-cash depreciation expenses, the average nursing home profit margin was 8.84 percent.
- Overall spending for direct care was 66 percent of net revenues, including 27 percent on nursing, in contrast to 34 percent spent on administration, capital, other, and profits.
According to lead author Charlene Harrington, Professor Emerita, University of California, San Francisco, “the results of this study show the need to ensure greater accuracy and completeness of cost reports, financial transparency, and accountability for government funding of nursing home care.”
“Too many seniors and families accept substandard care and inhumane conditions because their nursing home tells them that they cannot afford to hire more staff,” said Richard Mollot, LTCCC’s executive director and a co-author of the study. “This study provides important evidence showing that nursing homes get plenty of money, they are just not being held accountable for using it appropriately.”
The article can be accessed at https://journals.sagepub.com/doi/10.1177/27551938231221509.