From 2000 through 2013, there have been 1,223 nursing home closures. Nursing home closures have a negative impact on the displaced resident’s health and the local community (i.e. lost jobs). There are multiple factors that attribute to a nursing home closure; however, financial performance plays a significant role.The purpose of this paper is to examine the probability of nursing home failure via the Altman’s Z-Score bankruptcy prediction model. The Altman Z-score model is a discriminant function derived from a multiple discriminant analysis (MDA). The MDA generates a weighted linear function of the financial ratios that ‘‘best’’ discriminates between the group of firms in financial distress and those not in financial distress. Financial ratios include income and balance sheet ratios to assess the organization’s liquidity, profitability, efficiency and insolvency. This study will require the establishment and validation of new weight coefficients in order to properly predict if the organization is financially healthy or risky. This study utilized facility level data from the Medicare Cost Reports from 2000 to 2013. The sample size will be approximately 15,600 facilities per year. Hospital-based skilled nursing facilities, government facilities and nursing homes that receive no Medicare will be excluded from the study.The validated Altman’s Z-score model for nursing homes can serve as a tool for policymakers to identify nursing homes under financial distress. This can facilitate interventions targeting nursing homes that are at risk of closure.
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