The Role of Assisted Living Capacity on Nursing Home Financial Performance

Abstract

The rapid growth of the assisted living industry has coincided with decreased levels of nursing home occupancy and financial performance. The purpose of this article is to examine the relationships among assisted living capacity, nursing home occupancy, and nursing home financial performance. In addition, we explore whether the relationship between assisted living capacity and nursing home financial performance is mediated by nursing home occupancy. This research utilized publicly available secondary data, for the state of Florida from 2003 through 2015. General descriptive statistics were used to assess the relationships among financial performance, assisted living capacity, and occupancy. To explore the relationships among financial performance, assisted living capacity and occupancy, and test potential mediation of occupancy, we followed Baron and Kenny’s approach and estimated 3 models examining the relationships between (1) assisted living capacity and nursing home financial performance, (2) assisted living capacity and nursing home occupancy, and (3) nursing home occupancy and financial performance after assisted living capacity is included in the model. We used generalized estimating equations, to adjust for repeated measures and to model the above relationships. Year fixed effects control for time trend. The independent variable, assisted living beds, was lagged for 1 year to account for the potential influence on financial performance. The final analytic sample consisted of 7688 nursing home-year observations from 657 unique nursing homes. Our findings suggest that assisted living capacity does have a negative impact on nursing homes’ financial performance. Even though, assisted living capacity seems not to significantly decrease nursing home occupancy. The relationship between assisted living capacity and financial performance was not mediated through occupancy. These findings suggest that assisted living communities may not be able to significantly reduce nursing home occupancy; however, the presence of assisted living communities may create additional financial/competitive pressures that result in decreased nursing home financial performance.