Effects of Racial Composition on Nursing Home Quality and Financial Performance

Nursing homes with a high proportion of Blacks have been associated with higher deficiencies, lower quality of care, and nurse understaffing. The purpose of this study was to examine the effects of residents' racial composition on nursing home's financial and quality performance. This cross-sectional study used data from the Minimum Data Set Plus, the On-Line Survey Certification of Automated Records, the Medicare Cost Reports, and the Area Resource File. Dependent variables for the study included financial and quality performance measures. The primary independent variable was racial composition of residents in nursing homes: no Blacks, medium proportion of Blacks, and high proportion of Blacks. Ordinary Least Square (OLS) regressions were conducted with state and year fixed effects. The sample consisted of Medicare and Medicaid certified nursing homes across the United States during 1999-2004 (11,472 averages per year). Compared to nursing homes with no Blacks, nursing homes with high proportion of Blacks had 0.06% lower total profit margin, 0.04% lower operating margin, and $11 lower revenue per patient day. These facilities also had 23% higher proportion of Medicaid residents, lower proportion of RN's of one RN/ 100 residents, lower pressure ulcer prevention processes of 1.0 and 0.4 more quality of care deficiencies compared to nursing homes with no Blacks. Changes in Medicaid policy may disproportionately affect nursing homes with a high proportion of minorities, due to their heavy reliance on Medicaid. Policymakers should consider initiatives that may improve both the financial and quality performance of nursing homes serving predominantly Black residents.