Nonprofit vs. For-Profit Nursing Homes: What’s the Difference?

Updated

Certified Care Manager, Aging Life Care Professional, and National Master Guardian Emeritus

Deciding on a nursing home for yourself or a loved one is an emotional journey. You may not have much time to choose one that you can feel confident will take good care of your loved one. When someone goes to a nursing home, it almost always means that they require a high level of care for complex medical needs. 

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Nursing homes have been in the news these past three years as COVID-19 has taken the lives of a disproportionate number of nursing home residents compared with the rest of the US population. Residents in nursing homes are more vulnerable to infection, contributing to a high death rate. In the process of investigating the effect of the pandemic on nursing home residents, other troubling patterns have come to light.

Other problems are more disturbing and may give you pause when choosing a nursing home. The New York Times conducted a nursing home investigation and found that nursing homes routinely conceal infection control and other care issues. Also, the appeal process for citations from inspectors of nursing homes is not public. Adding to those problems are that for-profit nursing homes need to satisfy shareholders and do so by cutting staff and other costs.

What is the consumer to do? We will walk you through nonprofit vs. for-profit nursing home choices, how they differ,  and how to select the best nursing home for your loved one.

Are All Nursing Homes Facilities Nonprofit?

On the contrary, most nursing homes are for profit. Two-thirds of nursing homes in the US in 2019 were for profit. It helps to understand how for-profit nursing homes receive payment. Taxpayers fund most nursing home costs through Medicare and Medicaid. Other residents pay privately or through their long-term care policies.

Medicare pays for skilled nursing home care, which is short-term residential rehabilitation. Both traditional Medicare and Medicare Advantage plans pay for a certain number of days in skilled nursing, though some co-pays may apply. Some facilities have skilled nursing and long-term nursing care at the same location so that better Medicare reimbursement can subsidize Medicaid residents. 

On the other hand, nursing home care is mostly funded through Medicaid. Medicaid covers 62% of people in nursing homes. Medicaid will pay 100% of the cost of nursing home care for those who qualify. Medicaid pays a fixed daily rate, so a nursing home Medicaid beneficiary does not have to pay any part of the cost. 

That fixed daily rate is determined by the state where the nursing home is located. So, in other words, the nursing home must provide all of the resident’s care under that fixed daily rate. In 2018 the daily Medicaid amount was about $200 a day for each resident in a nursing home.

To qualify for Medicaid, you need to have no more than $2000 in assets, and the state determines the monthly income amount for you to qualify. In short, you have to give up most of your assets for Medicaid to pay for your nursing homestay.

What’s the Difference Between a For-Profit and Nonprofit Nursing Homes?

Things get confusing when evaluating for-profit nursing homes due to complex ownership arrangements that make it difficult even to know who the owners are in some cases. This makes it harder to hold for-profit nursing homes accountable in some cases. Non-profit nursing homes may have a more transparent ownership structure. 

1. The goal of for-profit nursing homes is to make money

In general, for-profit nursing homes are in the business of making money for their owner and or shareholders. Many nursing homes are part of corporate chains. Nursing homes often cut corners by understaffing (affecting staff to resident ratio) or eliminating other services because of the low Medicaid reimbursement. Also, the appeals process for nursing homes that receive citations can be lengthy and expensive. Some nursing homes pay fees associated with deficiencies rather than fight in court.

Although nursing homes claim that the Medicaid reimbursement is too low to make a profit, and the books may show that, an NPR report states that  for-profit nursing homes “paid themselves hundreds of thousands to millions of dollars in annual rents for each building, though some of that could be going to pay mortgages.” 

To be clear, just because a for-profit has the goal of making money does not necessarily mean they don’t provide good care. However, the philosophy and structure of for-profits incentivize making money sometimes at the expense of patient care. For-profits also must file annual tax returns with the federal and state government. They operate similarly to any other business.

2. Non-profit nursing homes are mission driven

Non-profit nursing homes can make a profit, but that money is not allocated to the owner or shareholders. The public owns a non-profit nursing home whose mission is to provide services and to ensure that any profits can continue its mission. Most nonprofits are exempt from income taxes, but they must file annual federal and state information returns, which are public record.

The takeaway message is that since non-profit nursing homes are not beholden to making a profit for their shareholders, any additional money is spent on the care of residents or other capital expenditures. Staffing is more likely to be robust, and staff may be better paid in a non-profit nursing home. 

Should You Choose a Nonprofit or For-Profit Nursing Homes Facility?

Considering the low number of non-profit nursing homes vs. for-profit ones, you may have little choice. Even if you can choose between the two, try finding the best nursing home regardless of profit status. However, most research shows better care, lower infection rates, and happier employees in non-profit nursing homes. 

Before choosing a nursing home, think about other possible senior housing options that might suffice instead of a nursing home. Sometimes creative approaches to care needs might eliminate nursing home placement. For example, senior group homes are increasingly common.

Tips for Finding the Best Non-Profit Nursing Homes

Even with non-profit nursing homes, you will want to take great care in choosing what you hope will be the best place. Using a tool like Medicare Compare is probably not in your best interest since many nursing homes have found ways to game the system. Instead, use ProPublica's Nursing Home Inspect report for more accurate reporting on deficiencies. 

As demographics shift and financial stability becomes an issue, more and more non-profit nursing homes are consumed by for-profit ones. Similarly, smaller nonprofits are bought by large corporate for-profit companies. The pandemic had a significant financial impact on most nursing homes. If you’re searching for the best non-profit nursing home near you, try these tips.

Call your local ombudsman program.

Your local or state ombudsman program is responsible for investigating allegations of abuse and neglect in nursing homes. By speaking with one of their staff, you may get some reliable information on any specific nursing home you have in mind.

Do an online search

If you live in a larger metropolitan area, you may want to conduct an online search to see what non-profit nursing homes pop up. But be prepared that many results will show for-profit options as well. Many non-profit nursing homes are faith-based but accept all denominations, so don’t let that discourage you. 

Don’t be influenced by appearance

If a non-profit doesn’t have the “chandelier effect,” don’t be swayed by that. Often any profits are returned to the community by hiring more staff and providing other resident-related services. Of course, you don’t want a place that isn’t clean or well-kept, but it doesn’t have to be pretty to provide excellent care.

Take a tour

Taking a tour is more than a simple breeze through the community. Make a mental note of potential red flags. For example, look for resident cleanliness, smells, staff demeanor, dining room ambiance, and staff responsiveness to your questions. Try and visit more than once if you have time to get a consistent impression of the nursing home.

Ask other healthcare providers

Doctors, nurses, therapists, and others can be great resources for finding a good non-profit nursing home. Ask about their direct experience and get as much information as possible about any recommended place. Social workers, geriatric care managers, and senior placement specialists are also excellent resources.

Check with faith-based organizations in the area

Whether you have a faith affiliation or not, inquiring about non-profit nursing homes from faith-based organizations could help. Reach out to local church organizations to ask about non-profit nursing homes.

Contact your local Agency on Aging (AAA)

Your local Agency on Aging is a public or private nonprofit agency to address the needs and concerns of older adults at the regional and local levels. AAAs provide some programs and services you may be familiar with, like meals on wheels, senior transportation, and other services. 

Most staff at AAAs have years of experience dealing with assisted living, nursing homes, and other senior-related living situations. They can often be a good resource in looking for a non-profit nursing home.

Consider a Continuing Care Retirement Community (CCRC)

A CCRC is a life plan community that provides all levels of care from independent to assisted/memory care to nursing home care. Most CCRCs require a buy-in along with additional monthly fees. Fees for CCRCs can vary from about $40,000 to over a million. A few are rentals. Almost 80% of CCRCs are non-profit, and most are faith-based. 

To consider a CCRC for a loved one, you should meet with a financial advisor to determine whether such a cost (and if you get back some of your investment) is worth it. Plus, the expense of a CCRC may not be sustainable in the long run. If your loved one is frail and not expected to live long, a CCRC may not make sense.

Understand Non-Profit vs. For-Profit Nursing Homes

The overwhelming prospect of finding a good nursing home can affect how much care you take in looking for one. If you can, take the time necessary to do your homework and find either a for-profit or non-profit nursing home that will provide the best care possible for your loved one.

Everyone deserves to spend their final years peacefully and comfortably. This might take a bit of work, but it’s worth the effort. 

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