Examining California nursing home profitability and related factors before and during the COVID‐19 pandemic

Background The financial status of nursing homes (NHs) is a policy concern, especially during a pandemic, because of the higher costs associated with infection prevention and resident care. Methods This exploratory study was designed to assess the impact of the federal and state COVID‐19 funding support on California NHs profitability during 2020, the first year of the pandemic, compared with 2019, the last pre‐pandemic year. The study examined the association of Medicare and Medicaid days, related‐party transactions, as well as other facility characteristics on net income profit margins, using cross‐sectional regression analysis of data from state NH cost reports and federal NH provider data for 2019 and 2020. Results California skilled NHs had average reported net income profit margins of 2.26% in 2019 and 7.0% in 2020 with wide variations (from a loss of about 48% to a gain of 74% in 2020). Regression analysis found that the number of beds, occupancy rates, high‐quality rating scores, and medium and high proportions of Medicare resident days were positively associated with net income margins in 2019 and 2020. Chains in 2020 (but not 2019), related‐party expenditures in 2019 and 2020, median Medicaid days (in 2019), high Medicaid resident days (71%–73% or higher) in 2019 and 2020, and medium and high managed care resident days were negatively associated with net income margins in both years. Conclusions Although NH admissions and occupancy rates declined substantially between 2019 and 2020, some (but not all) California NHs had a substantial increase in profit margins in 2020 over 2019. More studies of nursing home financial patterns and profitability are needed to examine trends over time and variations across states.