This study explores institutional mechanisms explaining the variation in nursing home quality. A two-level panel design with the national data is conducted. Structural equation modeling is employed to examine the main and interaction effects of institutional factors on nursing home quality at both facility and state levels. The findings indicate that the quality of nursing homes is more responsive to regulatory and payment constraints than to normative and mimetic mechanisms. The potential demand for care, Medicaid reimbursement rate, and occupancy rate are positively associated with nursing home quality. An interaction effect between the regulatory mechanism and nurse staffing is statistically significant. The findings lend support to the importance of multi-level analysis of nursing home quality.
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