OBJECTIVES: Antipsychotic drug use in dementia patients is considered suboptimal care. Nursing home level antipsychotic rate, a measure of nursing home quality of care, may lead to adverse outcomes. The study evaluated the association of nursing home level initiation of antipsychotics with 30-day all-cause hospitalization and mortality. METHODS:  This retrospective cohort study used Medicare claims data, Minimum Data Set, and the Online Survey, Certification, ad Reporting data from 2007-2009. The cohort included short-stay (nursing home stay ≤ 100 days) elderly nursing home residents with dementia. The outcome measures were 30-day all-cause hospitalization and mortality. Multilevel Andersen Behavioral model was used to select patient and contextual level predisposing, enabling and need factors. Contextual level nursing home antipsychotic initiation rate was categorized into tertiles (low, medium, or high) based on proportion of dementia residents newly started on antipsychotics during the baseline period. Hierarchical logistic regression models were used to determine the association of nursing home antipsychotic rate with 30-day hospitalization and mortality, while controlling for patient and contextual level covariates. RESULTS: The cohort included 9.611 patients from 2,548 nursing homes. In the hierarchical logistic regression models, nursing home level antipsychotic rate was not associated with 30-day hospitalization (low, OR 1.01, 95% CI 0.89-1.15; medium, OR 0.97, 95% CI, 0.84-1.13; high, OR 1.11, 95% CI 0.97-1.28) or 30-day mortality (low, OR 0.98, 95% CI 0.79-1.23; medium, OR 0.87, 95% CI, 0.66-1.14; high, OR 0.90, 95% CI 0.70-1.16); compared to 0% initiation rate. Patient level antipsychotic use was associated with increased risk of 30-day hospitalization (OR 1.18, 95% CI 1.01-1.37) but not with 30-day mortality (OR 0.96, 95% CI 0.73-1.26). CONCLUSIONS:  Nursing home level antipsychotic prescribing practices was not associated with short-term all-cause hospitalization or mortality. However, patient-level antipsychotic was associated with higher risk of 30-day hospitalization.