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Why Nonprofit SNFs Really Provide Better Care

Numerous studies have suggested that nonprofit skilled nursing facilities (SNFs) provide superior care. Compared to for-profit SNFs, nonprofits generally have better staffing levels, score higher in quality measures, and rank higher in overall star ratings. The conventional wisdom holds that the difference stems from company culture, with the implication that for-profit companies cut corners on patient care in order to increase profits. But does the data itself support such a conclusion? A review of Definitive Healthcare data on nonprofit, for-profit, and government-owned facilities suggests the profit-before-care explanation is not entirely accurate and that the differences in quality could stem in part from for-profit SNFs’ patient populations.

Judging by the data, it’s clear that substantial differences exist between nonprofit and for-profit facilities. For-profits had an average of two more reported health deficiencies than nonprofits, and one more than government-owned facilities. For-profits also scored especially poorly in staffing levels, with an average rating of 3.02 compared to 3.78 and 3.60 at nonprofits and government facilities, respectively. These differences held even when comparing facilities with similar operating margins.

Nonprofit Government For-profit
Overall Rating 3.68 3.36 2.97
Quality Rating 3.47 3.10 3.26
Staffing Rating 3.78 3.60 3.02
Nurse Staffing Hours per Resident Per Day 4.57 4.42 4.00
Reported Health Deficiencies 5.54 6.36 2.97
Net Operating Margin (%) -4.40 -1.50 0.80

 

Perhaps the most important difference among the facilities is the patient type, which is one likely reason why for-profit facilities have worse ratings and quality measures than nonprofit SNFs. Medicaid patients represented 62 percent of all patient days at for-profit SNFs, compared to only 48 percent at nonprofits. Given that Medicaid patients tend to be sicker and have a greater rate of mental illness compared to the total population, it’s unsurprising that facilities with a high Medicaid population may have worse quality outcome scores. Due to CMS’ scoring methodology, their higher use of patient restraints and anti-psychotic drugs also count against the facilities, despite the fact that there may be greater patient need. In many ways, for-profit SNFs would be better compared to government-owned facilities; their average values for net patient revenue, patient days by payor type, and utilization of antidepressant and antipsychotic drugs are all very similar.

Nonprofit Government For-profit
Medicaid Patient Days, % of Total 47.9  61.2 61.8
Medicaid Patient Days, % of Total  12.5 10.1 14.4
Private/Other Patient Days, % of Total  47.3 33.1 31.4
Residents Physically Restrained, %  0.7 1.1 0.8
Long-Stay Residents Administered Anxiety or Hypnotic Drugs, %  21.0 23.7 24.4
Long-Stay Residents Administered Psychotic Drugs, %  15.0 17.6 17.9

 

When compared to government rather than nonprofit SNFs, for-profit nursing homes fare much better in terms of quality measurements and scores, though they still rank behind in some areas. While government SNFs still have higher overall and staffing ratings, for-profit facilities have significantly greater average quality rankings. For nearly all other quality measures, the scores are comparable, most with differences in the half percent range or less. Overall, given that for-profit homes appear to have comparable quality to government facilities while using fewer employees, one could argue that the profitability is not a result of underinvesting in care and providing services below an unacceptable level, but a more efficient staffing structure. It’s also worth noting that the median net operating margin for government facilities was closer to that of for-profit rather than nonprofit SNFs.

However, if the level of care at nonprofit SNFs is held up as the only acceptable standard, rather than that available at government facilities, then the data suggests that it would be exceptionally difficult for many SNFs to break even, let alone make a profit. While about half of all for-profit facilities had positive operating margins, the same was true for only about a quarter of nonprofits. In addition, the unfavorable payor mixes at government and for-profit facilities would likely drive the percentage of profitable facilities even lower. Also, roughly 25 percent of nonprofit SNFs are part of IDNs, perhaps giving them more ability to absorb losses, compared to about 6 percent of all for-profit SNFs. Neither would have taxpayer support like government-owned facilities. So while profit-maximizing may play some role, it also seems likely that higher profit margins at the expense of offering the best conceivable care could be a necessary cost of staying in business.

Definitive Healthcare has the most up-to-date, comprehensive and integrated data on over 7,700 hospitals, 1.4 million physicians, and numerous other healthcare providers. Our long-term care database includes detailed clinical, financial, and quality metrics on 19,000 SNFs and SNF Corporations

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