Impact of Registered Nurse Staffing Ratio on Nursing Home Operating Margins and Quality Measure Star Ratings

Abstract

Today’s nursing homes are under immense pressure from government regulators to improve quality while the government simultaneously tightens reimbursement rates. These two forces squeeze operating margins. The question facing nursing home operators is how to improve quality without breaking the bank. This study looks at the association of more registered nurses (RN) with quality and margins in U.S. nursing homes.

This research project fills literature gaps which previously found improved nursing home quality correlates with more RNs. However, prior studies used self-reported data and typically considered only two or three quality measures. This study uses recently released electronic payroll data to more accurately report nursing labor hours, and it utilizes the government standard of 17 quality measures that make up the star ratings.

This study uses the Resource-Based View of the Firm theory with the Donabedian structure/process/outcome framework to analyze the relationship of RN staffing mix with operating margins and quality measure star ratings. The methodology of this project used ordinary least squares regression for operating margins and ordered logit regression for quality measure star ratings. The sample of 12,862 nursing homes omitted those that were either extraordinary data outliers or did not file complete cost reports.

This study determined that a higher proportion of RNs was correlated with lower operating margins and improved quality measure star ratings. Nursing home operators could expect to improve quality measure star ratings when utilizing higher RN staffing mix.