Quality of Care in Nursing Homes: an Analysis of Relationships Among Profit, Quality, and Ownership

Background: Recent work has highlighted a negative correlation between proprietary status and nursing home quality of care. This relationship might be explained by the context in which proprietary homes operate. However, another possible explanation is that some proprietary homes take excessive profit to the detriment of care quality.

Objective: To examine the relationship between profit levels and quality in proprietary and nonproprietary nursing homes (NHs), accounting for resident and market characteristics.

Methods: Data on 1098 free-standing NHs were taken from the California Office of Statewide Health Planning and Development, the On-line Survey Certification and Reporting System, and California licensing and statistical reports for 1998 and 1999. Tobit multivariate techniques were used to examine the relationship between deficiency citations and a range of explanatory variables, including profit.

Results: Proprietary homes in California had significantly lower quality of care than nonproprietary homes. A stratified analysis revealed that, controlling for resident, facility, and market characteristics, profits located within the highest 14% of the proprietary sector's profit distribution were associated with significantly more total deficiencies and serious deficiencies. This relationship was not found in nonproprietary facilities. Other factors related to deficiencies included the ethnic mix of residents and facility size.

Conclusions: Within the context in which proprietary homes operate, profit above a given threshold is associated with a higher number of deficiencies. Given this and the role of the proprietary sector in NH care, careful monitoring of profit levels in this sector appears warranted.