U.S. nursing home net profit margins

A 2023 analysis of nursing home data from 2019 found that nursing homes had a net profit margin of 0.58 percent. However, if disallowances* were removed, net margin stood at 5.66 percent. Net margin of nursing homes increased even more to 8.84 percent when depreciation was also excluded from calculations. According to the report, 99 percent of nursing homes had disallowed expenditures totaling 6.42 billion U.S. dollars in 2019. Moreover, 77 percent of nursing homes reported related-party organization payments of 11 billion U.S. dollars, which amounts to nearly 10 percent of net revenues. Given these findings, greater accuracy and transparency is needed to hold nursing homes accountable for their spending.

Net profit margin of nursing homes in the United States including or excluding disallowed expenses in 2019

Characteristic	Net margin of nursing homes
Net margin	0.58%
Net margin excluding disallowances	5.66%
Net margin excluding disallowances and depreciation	8.84%

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Release date

December 2023

More information

Region

United States

Survey time period

2019

Number of respondents

11,752 respondents

Special properties

All freestanding, non-government nursing homes reporting Medicare nursing home cost report data to CMS for 2019

Supplementary notes

The source adds the following:

*"Disallowances are expenses that are not allowed under government payment policies, such as excess payments beyond the fair market value for goods and services and, therefore, should not be included as expenses when calculating profit margins.
Depreciation is a non-cash NH expense that varies in accounting procedures and use across organizations. It is an estimated reduction in value of a fixed asset to account for the wearing out, consumption, or other loss arising from use over time or market changes. We excluded depreciation because it is an estimated non-cash expense and because we wanted to standardize expenses across NHs."

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