As a serial entrepreneur, I have seen industries come and go, but the nursing home industry has been a dependable source of growth. With an aging population, the demand for nursing home care has increased year over year. In this blog post, we will discuss the top seven nursing home KPI metrics that every owner and operator should track and calculate.

One of the first KPIs we will explore is the occupancy rate. This metric measures the percentage of beds that are currently filled in your nursing home. According to recent data, the average occupancy rate for nursing homes is over 80%.

  • Total revenue is another essential KPI for nursing homes. This metric measures the total earnings your nursing home has generated over a specific period. In the long term, you will want to see revenue growth year over year.
  • Average stay duration is an essential metric to track how long each patient stays in your nursing home. Recent data indicates that the average stay duration is 3.7 years.

These are just a few of the KPIs we will be diving into in this blog post. Whether you are an owner, operator, or investor in the nursing home industry, these KPIs will help you make data-driven decisions, optimize resources, and promote patient satisfaction. Scroll down to find out more about these top seven nursing home KPI metrics.



Total Revenue

As a nursing home owner or operator, it is critical to have a clear understanding of your facility's financial health. One of the most important metrics for measuring your financial performance is Total Revenue. Here are the details you need to know about this key performance indicator:

Definition

Total Revenue is the total amount of money generated from all sources of income for your nursing home over a specific period. This includes revenue from resident fees, insurance payments, government reimbursements, and other sources.

Use Case

Total Revenue is a critical metric for measuring the financial health of your nursing home. By monitoring this KPI, you can keep track of your facility's profitability and make informed decisions about future investments and growth plans. In addition, you can use this metric to compare your nursing home's financial performance to industry benchmarks and identify areas for improvement.

How To Calculate KPI

To calculate Total Revenue for your nursing home, use the following formula:

Total Revenue = Revenue from Resident Fees + Insurance Payments + Government Reimbursements + Other Sources

Calculation Example

Suppose your nursing home generated $500,000 in revenue from resident fees, $250,000 from insurance payments, $100,000 from government reimbursements, and $50,000 from other sources during the past quarter.

Using the formula above, Total Revenue would be calculated as follows:

Total Revenue = $500,000 + $250,000 + $100,000 + $50,000 = $900,000

Therefore, the Total Revenue for your nursing home during the past quarter was $900,000.

KPI Advantages

  • Measures your nursing home's financial performance and profitability
  • Helps you monitor your revenue streams and identify areas for improvement
  • Enables you to compare your nursing home's financial performance to industry benchmarks

KPI Disadvantages

  • Does not take into account expenses
  • May be affected by external factors such as changes in government policies or demographic trends
  • Can be influenced by one-time events or exceptional circumstances, leading to unreliable results

KPI Industry Benchmarks

According to industry benchmarks, the average Total Revenue for a nursing home in the United States is around $2 million per year. However, the actual figure may vary depending on factors such as location, facility size, and ownership structure.

Top Three Tips for Improving Total Revenue

  • Implement a strong marketing strategy to attract more residents and increase occupancy rates
  • Explore new revenue streams such as offering additional services or expanding your facility's capabilities
  • Monitor your expenses carefully and identify areas for cost-cutting to improve profitability


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Occupancy Rate

One of the key metrics for nursing homes is Occupancy Rate.

Definition

Occupancy Rate is defined as the percentage of available beds in a nursing home that are currently occupied by residents.

Use Case

Occupancy Rate is a vital metric for nursing homes as it directly impacts the revenue generation and sustainability of the business. A higher occupancy rate indicates optimal resource utilization and greater profitability.

How To Calculate KPI

The formula to calculate occupancy rate is:

Occupancy Rate = (Number of Occupied Beds / Number of Available Beds) x 100%

Calculation Example

If a nursing home has 80 beds, out of which 70 are currently occupied, the Occupancy Rate would be:

Occupancy Rate = (70 / 80) x 100% = 87.5%

KPI Advantages

  • Helps identify under-utilized resources: Low occupancy rates can help identify under-utilized resources and provide opportunities to improve profitability.
  • Allows for effective capacity planning: Occupancy rates help in determining the optimal number of beds to have and help with overall capacity planning.
  • Help improve revenue generation: A higher occupancy rate indicates better revenue generation for the nursing home.

KPI Disadvantages

  • May not reflect quality: Occupancy rates may not always reflect the quality of care provided by the nursing home.
  • May not account for seasonality: Occupancy rates may fluctuate based on seasonality, with lower occupancy rates during certain times of the year.
  • May depend on location: Occupancy rates may depend on the location of the nursing home and the demand for beds in that area.

KPI Industry Benchmarks

The industry average for Occupancy Rate is around 88%.

Tips & Tricks:

  • Offer special programs or promotions during off-peak seasons to increase occupancy rates.
  • Monitoring occupancy rates can help identify opportunities for expansion or renovation.
  • Regularly reviewing occupancy rates can help predict demand for beds and preemptively manage staffing and resource requirements.


Average Stay Duration

One of the most important metrics to track in nursing homes is the average stay duration. This metric calculates the average amount of time patients stay at the nursing home facility. Below, we’ll discuss the definition, use case, how to calculate KPI, calculation example, KPI advantages, KPI disadvantages, as well as industry benchmarks for this particular KPI.

Definition

The average stay duration measures the amount of time patients stay in a given nursing home. This can help facility managers understand how long patients are typically staying and what factors contribute to longer or shorter stays.

Use Case

Facility managers can use the average stay duration KPI to evaluate various factors regarding their patients. For instance, they could evaluate whether patients are being admitted for longer stays due to a lack of available options outside of the facility or whether staffing shortages are leading to shorter stays due to a lower quality of care. By monitoring this metric over time, managers can identify trends and quickly address any issues or problem areas.

How To Calculate KPI

Average Stay Duration = Total Days Stayed by Patients / Total Patients

To calculate the average stay duration, take the total number of days stayed by all patients at the nursing home over a given time period and divide it by the total number of patients during that same period.

Calculation Example

Let’s say that over the course of a month, a nursing home had a total of 75 patients stayed for a total of 1,500 days. To calculate the average stay duration:

Average Stay Duration = 1500 / 75 = 20 days

The average stay duration for this nursing home is 20 days.

KPI Advantages

  • Helps facility managers understand patient flow and identify areas that need improvement
  • Can help reduce costs by identifying factors that contribute to longer stays
  • Provides valuable data for better decision-making and resource planning

KPI Disadvantages

  • May not provide a complete picture of the patient experience, as shorter stays may be due to patients being transferred to other facilities
  • Does not take into account differences in patient types, acuity, or diagnoses that may affect length of stay
  • Can be influenced by external factors such as policy changes or fluctuations in demand

Industry Benchmarks

The average stay duration can vary significantly depending on the type of nursing home facility, location, and patient population. However, in general, a good benchmark for this KPI is around 30 days, with facilities in certain regions or with specific patient populations having longer or shorter stays.

Tips & Tricks

  • Regularly reassess patient care plans to ensure patients are receiving appropriate care and that factors impacting length of stay are being addressed
  • Monitor staffing levels and adjust as needed to ensure adequate coverage and high-quality care
  • Regularly review patient satisfaction surveys to identify areas that could impact length of stay


Average Daily Rate

As a nursing home owner or operator, understanding the financial health of your facility is vital for both patient care and fiscal planning. One way to measure the financial health of your facility is through Key Performance Indicators (KPIs). The 'Average Daily Rate' KPI is an important metric to track.

Definition

The Average Daily Rate (ADR) is the average daily revenue earned per occupied bed. For nursing homes, ADR represents the average amount of revenue that the nursing home earns per day for a resident's stay.

Use Case

The ADR KPI is useful for measuring the financial stability of a nursing home. It allows owners and operators to track how much revenue is generated per occupied bed, providing insights into how profitable the facility is.

How To Calculate KPI

ADR = Total Revenue / Total Number of Occupied Beds

Calculation Example

For example, in the month of July, the nursing home earned $100,000 in total revenue and had 50 occupied beds for the entire month.

ADR = $100,000 / 50 = $2,000

KPI Advantages

  • A simple KPI to understand and calculate
  • Helps nursing home owners and operators track the financial health of the facility on a daily basis
  • Allows for comparisons of financial health over time

KPI Disadvantages

  • Does not take into account expenses or other factors that can affect the financial health of the facility
  • May be affected by changes in occupancy rates, which can skew results

KPI Industry Benchmarks

  • According to Skilled Nursing News, the national average ADR for nursing homes in 2020 was $249.57 per day.
  • The ADR can vary widely by location, facility size, and level of care provided.

Top Tips for Tracking the ADR KPI:

  • Regularly update the number of occupied beds to get an accurate picture of revenue
  • Compare your facility's ADR to industry benchmarks to identify potential areas for improvement
  • Consider ways to increase revenue per occupied bed, such as offering additional services or amenities


Staff-to-Patient Ratio

As a nursing home operator, it is essential to track and calculate key performance indicators (KPIs) to ensure that your facility is operating efficiently and providing high-quality care for patients. One of the most critical KPIs to track is the staff-to-patient ratio.

Definition

The staff-to-patient ratio is a KPI that measures the number of nursing staff available for every patient in a nursing home.

Use Case

A high staff-to-patient ratio is essential for providing high-quality care for nursing home patients. By tracking this KPI, nursing home operators can ensure that they have enough staff to provide quality care and reduce the risk of mistakes due to staff burnout or understaffing.

How To Calculate KPI

To calculate the staff-to-patient ratio KPI, divide the number of nursing staff available by the number of patients in the nursing home. The formula is as follows:

Staff-to-Patient Ratio = Total number of nursing staff / Total number of patients in the nursing home

Calculation Example

Suppose a nursing home has 30 nursing staff and 150 patients. In that case, the staff-to-patient ratio would be:

Staff-to-Patient Ratio = 30 / 150 = 0.2

The result indicates that for every patient, the nursing home has 0.2 nursing staff available.

KPI Advantages

  • Helps nursing home operators make informed decisions about staffing levels
  • Reduces the risk of understaffing or staff burnout
  • Ensures that patients receive high-quality care

KPI Disadvantages

  • Does not take into account the level of care required for each patient
  • Does not account for the staff's experience or qualifications
  • The non-standardized method of calculating, resulting in varied results

KPI Industry Benchmarks

The Centers for Medicare and Medicaid Services (CMS) suggests a staff-to-patient ratio of 2.5 nursing staff hours per resident day as a minimum.

Tips and Tricks

  • Determine staffing requirements by examining patient acuity levels, nursing interventions, and the number of daily activities
  • Calculate the average number of hours per week each staff member is available
  • Establish and review staff schedules frequently to ensure adequate coverage


Patient Satisfaction Score

As a nursing home operator, tracking and analyzing key performance indicators (KPIs) is critical to the success of the business. One such KPI is the Patient Satisfaction Score.

Definition

The Patient Satisfaction Score is a KPI that measures a patient's overall satisfaction and experience within a nursing home facility. It provides valuable insights into the quality of care, services, and amenities that a nursing home provides.

Use Case

The Patient Satisfaction Score is essential for nursing homes as it allows them to identify areas for improvement and better meet their patient's needs.

How To Calculate KPI

The formula to calculate the Patient Satisfaction Score is as follows:

Patient Satisfaction Score = (Total number of positive survey responses / Total number of survey responses) x 100%

Calculation Example

For example, if a nursing home received 100 survey responses, and 80 were positive, the Patient Satisfaction Score would be:

Patient Satisfaction Score = (80 / 100) x 100% = 80%

KPI Advantages

  • Identifies areas for improvement
  • Provides valuable insights into the patient's experience
  • Improves patient retention and satisfaction

KPI Disadvantages

  • It can be subject to bias based on the patient's mood or personal experience
  • Survey fatigue may affect the reliability of data collected
  • It does not provide insights into specific areas for improvement

KPI Industry Benchmarks

The national average Patient Satisfaction Score for nursing homes is around 85%. However, this can vary depending on the region, size, and demographics of the nursing home's patients.

Top Three Tips for Improving Patient Satisfaction Score

  • Conduct surveys regularly to keep track of patient satisfaction levels and identify areas for improvement
  • Create a communication plan to stay in touch with patients and address their concerns
  • Invest in staff training to improve the quality of care and services provided to patients


Referral Rate

Referral Rate is a crucial KPI metric for nursing homes. In this chapter, we will explore the definition, use case, how to calculate, calculation example, KPI advantages and disadvantages and industry benchmarks for 'Referral Rate.'

Definition

The Referral Rate is the percentage of patients admitted to a nursing home that came from a referring hospital or physician. This KPI helps in calculating how many patients come from existing sources and how well the nursing home is doing at retaining patients.

Use Case

Referral Rate is a KPI metric that is widely used in nursing homes. A high referral rate indicates that the nursing home has good relations with hospitals and physicians, which is important for a steady flow of patients. This KPI allows nursing homes to effectively measure and track their referral pipeline and to evaluate the effectiveness of their marketing and communication strategies.

How To Calculate KPI

To calculate Referral Rate, use the following formula:

Referral Rate = (Number of patients referred / Total number of patients) x 100

Calculation Example

Assume that a nursing home admitted 50 patients in a month, and 20 of them were referrals from hospitals or physicians. To calculate the Referral Rate, use the formula:

Referral Rate = (20 / 50) x 100 = 40%

KPI Advantages

  • Referral Rate KPI helps nursing homes to calculate and track the effectiveness of their marketing and communication strategies.
  • It helps nursing homes to determine how many patients are coming from existing sources, and how well they retain patients.
  • It is a good indicator of how well the nursing home is performing in the industry as compared to other nursing homes.

KPI Disadvantages

  • It does not indicate the quality of care provided by the nursing home.
  • The Referral Rate is not always indicative of patient satisfaction or patient outcomes.
  • It is not a sufficient KPI to track the success of a nursing home's patient retention efforts.

Industry Benchmarks

The average Referral Rate in the nursing home industry is 35%. However, this varies depending on location and facility size. Nursing homes that have a Referral Rate over 50% are considered well-performing and are likely to attract more business.

Tips:

  • To increase Referral Rate, nursing homes should maintain strong relationships with existing referring hospitals and physicians by providing high-quality care to their patients.
  • Analysis of the Referral Rate data can provide nursing homes with insights into their marketing and communication strategies, which can be further improved to attract more referrals.
  • Referral Rate KPI should be analyzed in combination with other KPIs, such as Patient Satisfaction Rate and Occupancy Rate, to provide a comprehensive view of a nursing home's performance.


The nursing home industry has been a reliable source of growth for years, thanks to the increasing demand for elderly care. As a nursing home owner, operator, or investor, it is critical to track and calculate the top KPI metrics that affect your business's success.

Among the essential KPIs in nursing homes are occupancy rate, which measures the percentage of beds currently filled in your nursing home, and total revenue, which indicates the earnings generated in a specific period. You will want to see revenue growth year after year.

Another important metric to track is the average stay duration, which tells you how long patients stay in your nursing home. Recent data shows a 3.7-year average stay duration.

By monitoring these and other KPIs, you'll gain valuable insights to make data-driven decisions that optimize resources and promote patient satisfaction in your nursing home.

So whether you're looking to increase occupancy rates, boost patient satisfaction scores, or improve referral rates, tracking these top nursing home KPIs will help you achieve your goals and drive your business success.

Excel financial model

Nursing Home Financial Model
  • 5-Year Financial Projection
  • 40+ Charts & Metrics
  • DCF & Multiple Valuation
  • Free Email Support