Objectives: This study reports findings on functional change trajectories for long-stay residents by examining the effects of baseline medical conditions and functional status on changes in physical impairment across residents’ length of stay (LOS). Method: A 5% sample of nursing home residents from Michigan from 1999 through 2003 was used to create longitudinal episodes of care including Minimum Data Set (MDS) assessments. Data were analyzed using hierarchical linear models. Results: On average, physical impairment increases throughout a resident’s stay and is more rapid later in the stay. Greater physical and cognitive impairment at baseline leads to increasing impairment for residents whereas presence of baseline medical conditions, including heart disease and hip fracture, leads to slower rates of impairment. Discussion: Baseline functional status is critical to predicting changes in impairment while the impact of medical diagnoses is significant but weaker than the effect of baseline impairment.