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High Nursing Home Quality Boosts Bottom Line, UAB Study Shows

At a time of rising healthcare costs and lower insurance reimbursements, nursing homes may be concerned that high standards of quality could sacrifice financial performance. But a recent UAB study funded by the Administration on Aging shows that nursing homes with better quality also tend to have a more profitable bottom line.

“This study helps to make the business case for quality in nursing homes,” says UAB Health Services Administration Endowed Chair Robert Weech-Maldonado, PhD, who authored the study with colleagues from the University of South Florida and Texas A & M. “These results indicate that quality and positive financial performance aren’t mutually exclusive.”

The study analyzed data from 11,300 free-standing, non-governmental nursing homes nationwide that submitted Medicare cost reports. Results of the study showed that facilities with better processes and outcomes of care also achieved better financial performance. “Lower costs and higher revenues could explain the relationship between quality and financial performance,” says Dr. Weech-Maldonado. “This is because nursing homes with a higher quality of care may have lower resident costs due to more preventive practices and fewer errors.”

Dr. Weech-Maldonado stresses that these findings could be an important motivator for nursing homes that want to improve quality but are fearful of increasing costs. “Also, the findings provide insight for policy makers who may see the value in providing financial incentives to nursing homes — from the government or other outlets — for spearheading meaningful quality initiatives.”