Nursing home care in the USA


  • Author contributions: both authors were involved in the preparation and editing of the manuscript.

Manuel Eskildsen MD, Emory University School of Medicine, Division of Geriatrics Medicine and Gerontology, 1841 Clifton Road NE, Atlanta, GA 30329, USA. Email:


Nursing home care in the USA is part of the costliest health-care system in the world, and is a heavily regulated industry still struggling to maintain quality care across the country. The modern nursing home dates back to the 1930s and the passage of the Social Security Act, with continued growth of the industry after the 1960s, when the Medicare and Medicaid programs were created. As in other industrialized countries, the elderly population in the USA is growing, and the highest growth is occurring among those older than 85. This is the group with the highest health-care costs and rates of nursing home utilization. There are two major types of care provided in US nursing homes: long-term and subacute care. In the 1980s, quality of care became an important concern, which led to major reform and passage of new regulations under the law known as OBRA-87. During this time, the Minimum Data Set (MDS), which is a comprehensive assessment tool, was introduced. It continues to be a vital tool for both payment and research. Reform also ushered in the state survey process, which scrutinizes nursing homes yearly and assesses financial penalties for substandard care. The aging of the American population will provide challenges for financing nursing home care in the future. The use of private long-term care insurance is growing, and may be an important source of payment for this type of care in the decades to come.


The nursing home industry in the USA is an important component of the costliest health-care system in the world.1 It is also one of the most heavily regulated sectors of the American economy, and as a whole it persists in its struggle to maintain its quality standards despite some improvements in recent decades. As the US population ages, it is expected that a greater percentage of Americans will require long-term care services.

This review intends to give an overview of the country's nursing home care for readers outside of the USA, with an emphasis on the current financial and regulatory underpinnings of this industry and the looming challenges to its future.


From colonial times in the 1700s to the Great Depression in the 1930s, organized care of the infirm elderly was provided in a variety of settings, from poorhouses to homes sponsored by charitable or immigrant organizations.2 The Social Security Act of 1935 was enacted after the Great Depression that began in 1929, and, with its cash assistance program for elders, hastened the decline of poorhouses and ushered in an era of growth of for-profit nursing homes.3 Non-profit facilities expanded, albeit slowly, due to the restrictions of their frequently religiously-based sponsoring organizations.

After World War II, the next event that promoted growth in the nursing home industry was passage of the Hill-Burton Act in 1946. Its main effect was to improve the nation's hospital system, but it also promoted nursing home expansion, as many former hospital buildings were converted for extended care.2 In 1965, President Lyndon Johnson signed the Medicare and Medicaid programs into law. These programs continue to be the main source of health insurance for adults over the age of 65 years, with Medicaid being the primary payer of long-term nursing home benefits and Medicare paying for skilled short stays in nursing homes (as discussed below). Both systems provided financing for nursing home care and further added to the industry's growth.3

As the nursing home industry continued to develop, there were increasing concerns about poor quality of care. These concerns led to government-mandated changes found in the Omnibus Budget Reconciliation Act of 1987 (OBRA-87),4 which created a minimum set of standards for nursing homes around the country that focused on outcomes. The resulting regulatory environment exists to this day.

Demographics and financing

In 2004, there were 36.3 million people in the USA over the age of 65 years, accounting for 12% of the population.5 This cohort is expected to grow as the population born after World War II, known as the “baby boom” generation, reaches retirement age. Among the elderly, the population over the age of 85 years is growing at the fastest rate.6 This is significant because they are the age group with the highest health expenditures. As for nursing home utilization, only 4% of Americans over 65 years live in nursing homes, yet this number grows to 17% among those older than 85 years (see Fig. 1).6

Figure 1.

Percentage of Medicare enrollees aged 65 years and over residing in selected residential settings, by age group, 2003.6

How does the USA compare with other industrialized countries in this regard? In a study comparing the elderly populations of eight countries with high life expectancies in the year 2000, the USA had the third lowest population over the age of 65 years, at 12.5% (Japan had the highest, at 17.1%). The aging of the population is also projected to be comparatively slower here: in 2020, 16.6% of Americans will be over 65 years, compared with Japan, at 26.2%.7 Among the reasons for these demographic projections are higher fertility and rates of immigration in the USA. There appears to be no correlation between the aging status of a country and its rates of nursing home placement.8 However, rates of nursing home utilization vary among industrialized countries, with the USA near the lower end of the range (Table 1).7

Table 1.  Projected percentage rates of placement in nursing homes in eight countries for subjects aged 65 years and older, 20001
CountryProjected institutionalization rate
New Zealand5.5%

There are two major types of patients in American nursing homes: the ones who reside in the facilities and receive long-term care, and those who are admitted for subacute care, most commonly following hospitalization. These two groups differ in terms of their clinical characteristics, as well as in the sources of financing for their nursing home stays.

Long-term care is the more traditional system in a nursing home. Caregivers' most common reasons for seeking placement are increased skilled needs (e.g. help with activities of daily living, continence care), caregivers' health and dementia-related behaviors.9 This type of care is not reimbursed by Medicare, the federal insurance program for elderly persons. As a result, most patients have to pay for their stays out of pocket, unless and until they become poor enough to qualify for Medicaid, the joint state/federal insurance program for the indigent.

Subacute (or “post-acute”) care is the most rapidly growing sector of the nursing home industry.10 Dedicated skilled nursing units provide service for post-hospitalized patients, mainly for the purpose of rehabilitation, wound care or other post-acute care. Part of the reason for this sector's growth has been the fact that this care is reimbursed by Medicare, which pays nursing facilities at a higher rate than Medicaid. Per diem rates under Medicaid averaged $US103.50 around the country in 2000,11 whereas the average Medicare daily rate in 2005 was $US280.70.12 Medicare provides coverage of up to 100 days after a medically necessary hospital stay of at least 3 consecutive days. The most common reason for a skilled nursing facility admission in 2004 was rehabilitation after orthopedic surgery, such as total hip replacements.13 Other typical diagnoses are strokes, acute compression fractures, pressure ulcers, and cardiac and pulmonary disorders.10 The main purpose of a subacute admission is rehabilitation to ensure the highest possible level of function in order to return to the previous living arrangement in the community.

Quality improvement and the regulatory environment

In the 1980s, nursing home regulation was administered by the Health Care Financing Administration (HCFA), the organization which would later be renamed as the Center for Medicare and Medicaid Services (CMS). In 1982, the HCFA sought to loosen regulation of nursing homes at the industry's request; this led to strong opposition by US consumer groups and state regulatory agencies who felt that more regulation, not less, was needed. As a result, the HCFA contracted the National Academy of Sciences' Institute of Medicine (IOM) to study the proposed changes and their potential effect on the quality of care. Four years later, the IOM's landmark “Improving the Quality of Care in Nursing Homes” report was published, citing over 40 specific recommendations for reform.14 This report became the foundation of the Federal Nursing Home Reform Act (NHRA), passed under OBRA-87.4

Minimum Data Set

Among the many reforms that the NHRA implemented was the requirement of a resident assessment tool by which the facility could identify the needs of each patient and assess its ability to meet those needs.15 This led to the creation of the Minimum Data Set (MDS), a standardized assessment tool that collects variables such as the condition and status of each patient residing within the nursing home.10 The 230-item MDS is a multi-purpose tool.16 It is used by the CMS to calculate payments for the care of each patient based on their needs and disability and to generate quality indicators.17 Each patient must have their MDS completed on admission and on a regular basis afterwards. For example, a patient admitted under Medicare A for skilled post-acute care will need their MDS updated on the fifth, 14th, 30th, 60th and 90th days of admission.18 It is also used as a database for research, and many studies into the prevalence and incidence of disease in the long-term care setting utilize data from the MDS dataset repository.18 There is also a large-scale international project involving researchers in more than 20 countries to use the MDS and other assessment protocols around the world.19

The current MDS is a revised second version (2.0) of the original, and a third version (3.0) has completed validation studies and will be released in the USA soon. Each version increases the focus of the MDS towards its main goal of improving the quality of care for the nursing home resident. There are several commercially available computer programs that compile and submit the MDS to the CMS, for both reporting and research use.20 Recently, software has been developed that incorporates data from an electronic medical record into the MDS, but the majority of MDS completion is done by trained nurses and other professionals who utilize the medical record (including nurse's and physician's progress notes) in gathering the data.

Data from the MDS are invaluable in improving the quality of care in nursing homes. Several measures of quality in the nursing home are under study, including the use of restraints, decline in activities of daily living, and incidence of transfers to an acute care hospital. This project utilizes MDS data to determine the incidence and prevalence of these areas of concern.21

Local government oversight

Another aspect of quality improvement is the survey process. Since the NHRA established that government at the state level is responsible for ensuring that licensed nursing homes meet state and federal standards of care, all states carry out an annual survey for each nursing home, which must be done within 15 months of the previous survey.18 The surveyors are often not health-care professionals, but trained employees of the state. Registered nurses (RN) sometimes act as surveyors, but it is quite uncommon for a physician or a mid-level medical practitioner (such as a physician's assistant or nurse practitioner) to be one.

Surveyors have a difficult task, in that they must review both individual nursing home residents' charts as well as general facility performance on hundreds of state and federal regulations. These regulations, many of which originated in the original NHRA legislation, cover direct patient care issues (such as medication review, use of restraints, injuries and pressure ulcers) to housekeeping issues (e.g. water temperature at the tap, dining services and climate control). Deficiencies are graded based on severity of patient harm and the scope, or number of residents potentially (or actually), affected. Applied to a grid, the deficiency is assigned a letter grade, with “A” being the least severe and “L” being the most harmful (Table 2).22 Penalties for facilities found to be providing substandard care may go from denial of payment for new admissions to temporary takeover of management of the nursing home, depending on the severity of the deficiency.

Table 2.  Scope and severity matrix for deficiencies in nursing home surveys Thumbnail image of

The results of each survey are compiled by the CMS within a central database, called OSCAR (Online Survey, Certification and Reporting) and made available to the public through the CMS's “Nursing Home Compare” website. This is combined with data from the MDS repository and OSCAR, and nursing homes are then graded by percentile in areas such as vaccinations, pressure ulcer incidence, pain control, continence management and the prevalence of symptomatic mood disorders.23

Nursing home and its staff

Facility and resources

The early architectural design of nursing homes came from the hospitality industry; therefore, many nursing homes resembled small hotels or apartment complexes. Because these early nursing homes were mostly for patients without severe, chronic medical illness, the focus was on shelter rather than medical therapy. However, as the patient base of the nursing home changed over time, design elements from other health-care facilities such as hospitals were incorporated.24 The modern nursing home now tries to create a homelike and therapeutic environment with attention to accessibility, security and safety.25

Nursing homes in the USA have an average of 107 beds,26 often divided geographically into sections based on nursing need. For example, patients with dementia may be grouped on a secured unit with a higher nurse-to-patient ratio, while less disabled patients may be on a unit with a lower staffing ratio but with greater public access. Nursing homes also have common areas for dining, social activities and patient comfort. Often these common areas are utilized for group therapy sessions. Most nursing homes also feature a large kitchen for the preparation of meals, laundries and areas for administration and maintenance. Some facilities contract these services from outside vendors.10

Available medical technology is similar to that of an ambulatory clinic, where most laboratory and radiographic services are contracted through outside vendors. Many nursing homes have been increasing the level of technology available “in-house” such as point-of-care devices for the management of warfarin therapy and bladder ultrasonography for continence management. However, care of the seriously ill medical patient often involves transfer to a nearby hospital for advanced diagnostics such as computed tomography or magnetic resonance imaging.

Nursing home staff

The most common nursing staff member is the nurse's assistant, or CNA (certified nurse assistant), who is able to assist a patient with activities such as dressing and eating, but cannot perform basic medical tasks. Several CNA may report to an LPN (licensed practical nurse), who may give oral medications to patients and perform basic medical procedures such as wound care and bladder catheterization. A nursing home must have one or more RN on staff who are able to add the administration of i.v. medication, including narcotics, to the abilities of the LPN. However, the RN is often placed in a senior position as a supervisor or director of nursing and is less involved in direct patient care. Staffing ratios (the number of patients a nurse or nurse's aide is assigned to care for) have minimum levels mandated by the state the nursing home operates in, and have been shown to affect quality of care.27

As the trend toward post-acute admissions increases, the staff in nursing homes has become more diverse and many different therapy professionals (speech, occupational, activity and physical) have joined the interdisciplinary team. Care coordination is often the responsibility of a social worker, or nurse case manager. Support staff may include persons with risk management, MDS coordination and infection control responsibilities. Additionally, daily operations depend on a dedicated group of persons: administration, food services, maintenance, transportation and volunteers.

Physician extenders, such as physician's assistants (PA) or nurse practitioners (NP), are rarely hired by the nursing home and instead often work for the attending physician. These advanced practitioners may admit patients and provide medical care, including the prescribing of medicines and diagnostics, but this varies depending on the medical practice act of the state in which they are practicing. Often they must work under the supervision of a licensed physician and have restricted prescribing abilities, particularly with respect to narcotic analgesics.10

Physicians make up a vital part of the nursing home medical staff, but represent a small percentage of the workforce involved. Federal requirements state that a physician must see a nursing home patient every 30 days for the first 3 months of the patient's admission, and then every 60 days thereafter, though these visits may alternate between the physician and their extender (NP or PA). The physician (or their delegate) must be available for emergencies 24 h a day. Usually, this means that the physician is available by phone, and often when a patient needs urgent attention after-hours, that patient is sent to the local emergency department for evaluation.10

The medical director of the nursing home is a physician who supervises the medical services at the facility. The medical director is responsible for the care provided by the primary and consulting physicians at the nursing home, and monitors the quality of care. Developing educational programs for staff, collaborating with administrators on process improvement, and the creation of policies for appropriate medical care are other expectations of the medical director.28 Often these physicians work part-time in this role, and most also act as a primary physician for patients at the facility.

Future issues

As the “baby boomer” generation ages, the numbers of people aged over 65 years will continue to increase, especially among those aged over 85 years. This will present significant economic challenges in the coming decades, particularly in long-term care, due to the fact that the oldest-old are more likely to require nursing home placement.

Compared to other expected health expenses for a 65-year-old, such as prescription drugs, uncovered doctor's bills, and insurance co-payments, the uncovered costs for long-term care are expected to be much greater over the rest of a lifetime.29 This is partly because the costs of nursing home care tend to be borne more by individuals in the USA (39% in 2004)30 compared with other industrialized countries.

Nursing home costs are expected to increase over this century, along with the growth of the population. The US Congressional Budget Office estimates that total expenditures for long-term care services will increase from $US195 billion in 2000 to $US540 billion in 2040, at a rate of 2.6%/year above inflation31 and this has created incentives for other sources of funding. With the chronic funding problems of Medicaid and Medicare, private long-term care insurance has emerged as one of the leading alternatives. It is expected that the percentage of long-term care paid for by private insurance will grow from 4% in 2000 to 17% in 2020.31 Nonetheless, it is not likely to be a broad-based solution for the problem of long-term care funding, mainly because of its cost: a policy with protection for inflation cost more than $US1000 a year in 2002.32 Also, with the explosive growth in the use of benefits, it is unclear whether its actuarial models will be accurate enough to sustain reimbursing all its beneficiaries in the coming decades.

The degree to which these demographic changes will burden the USA and its economy will depend on other factors. America's higher rate of immigration compared to that of other industrialized countries has helped it keep its proportion of the elderly population lower, despite similar gains in life expectancy.7 If immigration rates were to fall, the ratio of working-age adults to elderly could decline, increasing the stress on the health-care system. Another consideration is people's level of disability as they age. As life expectancy in the USA has increased, Americans have enjoyed better health in their older years, with lower rates of disability. It is not yet clear whether living longer, but healthier, will result in greater utilization of long-term care services. However, analyses of Medicare data have shown that while overall health expenditures may remain neutral as people live longer with less disability, the utilization of long-term care services may increase.33,34

In this uncertain scenario, it will not be easy for the USA to plan the financing for its long-term care system decades into the future. If nursing home utilization is likely to increase, who will bear the expense? Increasing nursing home utilization has the potential to add to the stress on Medicare and Medicaid, as well as negatively affect the finances and productivity of caregivers. If recent trends are a guide, it is unlikely that federal policymakers will enact broad government-based financing for long-term care as the only solution. As is shown by the expansion of the long-term care insurance industry, private funding is likely to play an important role.


The authors would like to thank Theodore Johnson MD MPH and Joseph Ouslander MD for reviewing the manuscript.