Nursing Home Ownership and Public Policy: An Historical Analysis

In the early days of the United States, care of the disabled elderly outside the home meant the public almshouse. By the 1920s, private, nonprofit homes for the aged were prevalent. More recently, private, for-profit facilities have grown to dominate the field. For-profit ownership has been controversial. Underlying the controversy is the concern that quality might be lowered in order to enhance profit. This study asks why most nursing homes are privately owned and why most privately owned nursing homes are operated for profit. It does so with reference to The Nonprofit Economy, in which Burton Weisbrod describes a 3-sector economy that includes public, nonprofit and for-profit organizations. Weisbrod\u27s model contrasts the 3 sectors, in the way they gain access to capital, in the way they relate to their public or customers and in how they respond to varying levels of information about and demand for their services. This study uses secondary sources as well as primary sources such as state and federal government documents, newspaper reports, Congressional testimony, trade publications and interviews with experts in the field. The study reaches three important conclusions: Public facilities, like the almshouses, lost favor because of dissatisfaction with the quality of care they provided and high costs. Government policies that enhanced income security and health care financing enabled private organizations to develop nursing homes. During the period of rapid nursing home expansion, relatively few private, nonprofit organizations took advantage of the financial opportunities to open new nursing homes. Despite many new facilities, quality of care remained a problem in nursing homes. The publication of Improving the Quality of Care in Nursing Homes in 1986 led to legislation and regulations that guarantee a higher level of quality in federally certified nursing homes