Non-Profit vs. For-Profit Nursing Homes: Is there a Difference in Care?

One of the many decisions individuals and families face when they need long-term care is choosing a facility.  A key factor that should be considered is whether to choose a for-profit corporate facility or a non-profit facility. Federal and state policymakers also need to consider the implications of ownership information as they design and implement regulatory and reimbursement policies.

Does It Really Matter or Make a Difference?

Yes.  Extensive research finds that the type of nursing home ownership and sponsorship affects the quality of care that facilities provide to their residents. 

Investor-owned, for-profit health care corporations and their implications for quality of care for patients were the subject of a 1986 report by the Institute of Medicine (IoM), For-Profit Enterprise in Health Care.[1]  Evaluating the increasing "corporatization" of hospitals, the IoM looked to the history of nursing homes, where the corporatization of ownership had been occurring since the 1970s.[2]  Both "impressionistic evidence" and empirical research documented differences in quality related to ownership.  For-profit and chain-operated nursing facilities tended to devote fewer resources to direct patient care, resulting in poorer quality of care for residents.[3]  Evaluations of "resource inputs, licensure violations, complaints, and outcome-oriented measures of quality" all generally found that not-for-profit nursing facilities provided better care.[4]  These early findings of the IoM have been replicated repeatedly. 

Quality of care is now frequently evaluated across three domains.  The three domains, first identified by A. Donabedian, are: structure (resources used to provide care; e.g., staffing); process (actions used to provide care; e.g., restraints); and outcomes (end results for patients; may be bad outcomes, e.g., pressure ulcers, or good outcomes).[5]  Consistently, research in the quality of nursing home care since the IoM report has reported that not-for-profit nursing facilities have higher nurse staffing levels and fewer health care deficiencies than their for-profit counterparts.  For-profit facilities, particularly those owned by multistate chains, are more likely to reduce spending on care for residents and to divert spending to profits and corporate overhead.  While the research findings do not necessarily apply to an individual nursing home – some for-profit nursing facilities give excellent care and some not-for-profit nursing facilities give poor care – the general rule is documented in study after study: not-for-profit nursing facilities generally provide better care to their residents.

In 2011, the first-ever analysis of the ten largest for-profit nursing home chains reported that between 2003 and 2008, compared to all other ownership groups,[6] facilities owned by the top ten for-profit chains had:

• The lowest staffing levels;
• The highest number of deficiencies identified by public regulatory agencies; and
• The highest number of deficiencies causing harm or jeopardy to residents.[7]

The Government Accountability Office (GAO) reported in 2011 that nursing facilities acquired between 2004 and 2007 by the top ten private equity firms:

• Had more total deficiencies than not-for-profit facilities;
• Reported lower total nurse staffing ratios; and
• Showed capital-related cost increases and higher profit margins, compared to other facilities.[8]

In 2010, the GAO reported that compared to other nursing facilities, Special Focus Facilities (i.e., those identified by CMS as among the poorest performing facilities nationwide): [9]

• Are more likely to be part of a chain and for-profit, compared to other facilities;
• Have fewer registered nurses per resident day; and
• Are ranked lower on CMS’s Five-Star System.[10]

The GAO reported in 2009 that compared to other nursing facilities, Special Focus Facilities, which have more deficiencies and more serious deficiencies than other facilities, are:

• More likely to be for-profit;
• More likely to be part of chain; and
• Have almost 24% fewer RNs/resident/day and fewer nursing staff at all levels/resident/day.[11]

In September 2007, an investigative report in The New York Times found that:

• Nursing facilities owned by private equity firms were 41% more profitable than other nursing homes;
  • One facility it focused on, in the year after its takeover by a private equity firm, cut the number of registered nurses in half and cut spending on nursing supplies, activities for residents, and other supplies, leading to poorer resident care.

A recent study by LeadingAge New York, the association that represents not-for-profit nursing facilities in New York State, found that not-for-profit facilities:

• Performed better on most measures than for-profit facilities in the state;
• Had fewer residents using antipsychotic drugs or with physical restraints;
• Had lower hospitalization rates, and more discharges to home;
• Had more nursing staff and fewer survey deficiencies and spent more money per day on nursing costs and food. 

A review and meta-analysis of 82 studies comparing quality of care in for-profit and not-for-profit nursing facilities reported that nearly all the studies found higher quality, higher staffing, and fewer pressure sores in not-for-profit facilities.  Not-for-profit facilities had better outcomes on four key measures of quality:

• "More or higher quality staffing;"
• Lower prevalence of pressure ulcers;
• Lower prevalence of restraints; and
• Fewer government-cited deficiencies.

The authors estimated that if all nursing homes in the United States were operated on a not-for-profit basis:

• 7,000 residents with pressure sores would not have them;
• Residents would receive 500,000 more hours of nursing care each day.[12]

Conclusion

Ownership and sponsorship type have repeatedly been shown to make a difference in the quality of care given to residents.  The Affordable Care Act recognizes the importance of ownership information and requires nursing facilities to report, and the Centers for Medicare & Medicaid Services to make publicly available, detailed ownership information.[13] Families looking to place loved ones in a nursing facility should use the available information to help them make informed decisions about where to find the best care.  In addition policymakers should design reimbursement systems to ensure that nursing facilities spend public reimbursement dollars in ways that policymakers intend – on care for residents.