Managing a nursing home is tough.
Managing a nursing home while turning a profit is even tougher.
So, when a nursing home does close, it’s hardly a surprise. Nursing homes must adhere to strict state laws that dictate staffing levels. Most nursing homes accept Medicaid which has been reducing payments to nursing homes since 2011. The growing discrepancy between cost of care and reimbursement rates is the biggest reason nursing homes get into financial trouble.
The geography and demography questions
The Journal of the American Medical Association (JAMA Internal Medicine) published a study on the geographic concentration of nursing homes that closed between 1999 and 2008.
The introductory article of the study mentions previous studies that found closed nursing homes had common problems – low occupancy, poor payer mix (many Medicaid residents) and more citations. Nursing homes in competitive markets were also more likely to close.
The study asked two questions:
- Are nursing home closings geographically patterned or concentrated?
- Are closures related to ethnic/racial makeup or poverty levels?
During the 10-year period, nearly 16% of all nursing homes closed. This reduced the number of beds by five percent. The closings were partially in response to the rapid expansion of nursing homes in the early and mid 1990’s (pg 808).
50% of all hospital based nursing homes closed between 1999 – 2008 vs 11% of free-standing nursing homes.
As per the two questions:
- Nursing homes in heavily black and Hispanic zip codes were more likely to close than those located elsewhere.
- Nursing homes in these neighborhoods relied on Medicaid more than nursing homes elsewhere.
- Nursing home closures were related to both race/ethnicity and income.
The paper ends with the implications of its findings – more nursing homes are likely to close if they cannot make money.