Joseph Angelelli

A long-standing assumption among economists is that nursing home quality is common across Medicaid and private-pay patients within a shared facility. However, there has been only limited empirical work addressing this issue. Using a unique individual-level panel of residents of nursing homes from seven states, we exploit both within-facility and within-person variation in payer source and quality to examine this issue. We also test the robustness of these results across states with different Medicaid and private-pay rate differentials. Across various identification strategies, our results are consistent with the assumption of common quality across Medicaid and private-paying patients within facilities.

Objectives. The movement to publicly report data on provider quality to inform consumer choices is predicated on assumptions of equal access and knowledge. We examine the validity of this assumption by testing whether minority/less educated Medicare patients are at greater risk of being discharged from a hospital to the lowest-quality nursing homes in a geographic area. Methods. We used the 2002 national Minimum Data Set to identify 62601 new Medicare admissions to nursing homes in 95 hospital service areas with at least 4 freestanding nursing homes and at least 50 African Americans aged 65 years or older with Medicare admissions to nursing homes. Results. The probability of African Americans’ being admitted to nursing homes in the lowest-quality quartile in the area was greater (relative risk [RR]=1.26; 95% confidence interval [CI]=1.0, 8.45) in comparison with Whites. Individuals without a high-school degree were also more likely to be admitted to a low-quality nursing home (RR=1.22; 95% CI=1.0, 1.46). Conclusions. African American and poorly educated patients enter the worst-quality nursing facilities. This finding raises concerns about the usefulness of the current public reporting model for certain consumers.

The extent to which nursing homes rely on the use of contracted licensed staff, factors associated with this staffing practice, and the resultant effect on the quality of resident care has received little public attention. Merging the On-line Survey Certification and Reporting System database with the Area Resource File from 1992 through 2002, the authors regressed organizational and market-level variables on the use of 5 percent or more contract full-time equivalent registered nurses and licensed practical nurses. Since 1997, the proportion of facilities using 5 percent or more contract licensed staff more than tripled. Use of contract nurses was associated with more deficiency citations, characteristics of poorer facilities, and tight labor markets. Nursing homes increasingly rely on contract nurses. The failure of nursing homes to attract and retain a competent, stable workforce creates a vicious cycle of staffing practices, which may lead to decline in quality of care.

Various studies have observed low quality in the nursing home industry. Although Medicaid is the dominant payer of U.S. nursing home services, the association of Medicaid payment rates and quality is not entirely clear, in part because resident-level, risk-adjusted information on quality is lacking. This study examined the relationship between Medicaid payment rates and three risk-adjusted quality measures, controlling for market and facility characteristics. Higher payment was associated with lower incidence of pressure ulcers and physical restraints but not daily pain. Quality of nursing home care may suffer if budget shortfalls force state legislatures to freeze or reduce Medicaid rates.

Objective. To examine the effect of Medicaid reimbursement rates on nursing home quality in the presence of certificate-of-need (CON) and construction moratorium laws. Data Sources/Study Setting. A single cross-section of Medicaid certified nursing homes in 1999 (N=13,736). Study Design. A multivariate regression model was used to examine the effect of Medicaid payment rates and other explanatory variables on risk-adjusted pressure ulcer incidence. The model is alternatively considered for all U.S. nursing home markets, those most restrictive markets, and those high-Medicaid homes to isolate potentially resource-poor environments. Data Extraction Methods. A merged data file was constructed with resident-level information from the Minimum Data Set, facility-level information from the On-Line, Survey, Certification, and Reporting (OSCAR) system and market- and state-level information from various published sources. Principal Findings. In the analysis of all U.S. markets, there was a positive relationship between the Medicaid payment rate and nursing home quality. The results from this analysis imply that a 10 percent increase in Medicaid payment was associated with a 1.5 percent decrease in the incidence of risk-adjusted pressure ulcers. However, there was a limited association between Medicaid payment rates and quality in the most restrictive markets. Finally, there was a strong relationship between Medicaid payment and quality in high-Medicaid homes providing strong evidence that the level of Medicaid payment is especially important within resource poor facilities. Conclusions. These findings provide support for the idea that increased Medicaid reimbursement may be an effective means toward improving nursing home quality, although CON and moratorium laws may mitigate this relationship.

Nursing home care is currently a two‐tiered system. The lower tier consists of facilities housing mainly Medicaid residents and, as a result, has very limited resources. The nearly 15 percent of U.S. nonhospital‐based nursing homes that serve predominantly Medicaid residents have fewer nurses, lower occupancy rates, and more health‐related deficiencies. They are more likely to be terminated from the Medicaid/Medicare program, are disproportionately located in the poorest counties, and are more likely to serve African‐American residents than are other facilities. The public reporting of quality indicators, intended to improve quality through market mechanisms, may result in driving poor homes out of business and will disproportionately affect nonwhite residents living in poor communities. This article recommends a proactive policy stance to mitigate these consequences of quality competition.

Objective.To examine skilled nursing facilities (SNFs) “make‐or‐buy” decisions with respect to rehabilitation therapy service provision in the 1990s, both before and after implementation of Medicare's Prospective Payment System (PPS) for SNFs.Data Sources.Longitudinal On‐line Survey Certification and Reporting (OSCAR) data (1992–2001) on a sample of 10,241 freestanding urban SNFs.Study Design.We estimated a longitudinal multinomial logistic regression model derived from transaction cost economic theory to predict the probability of the outcome in each of four service provision categories (all employed staff, all contract, mixed, and no services provided).Principal Findings.Transaction frequency, uncertainty, and complexity result in greater control over therapy services through employment as opposed to outside contracting. For‐profit status and chain affiliation were associated with greater control over therapy services. Following PPS, nursing homes acted to limit transaction costs by either exiting the rehabilitation market or exerting greater control over therapy services by managing rehabilitation services in‐house.Conclusions.The financial incentives associated with changes in reimbursement methodology have implications that extend beyond the boundaries of the health care industry segment directly affected. Unintended quality and access consequences need to be carefully monitored by the Medicare program.

Purpose:This study examined how rural hospitals altered their postacute and long-term care strategies after the Balanced Budget Act of 1997 (BBA97). Design and Methods:A nationally representative sample of 540 rural hospital discharge planners were interviewed in 1997. In the year 2000, 513 of 540 discharge planners were reinterviewed. The study is a descriptive analysis of how rural hospitals formed new and altered existing organizational strategies during a time of turbulent changes in federal government reimbursement policy. We classify rural hospital strategic behavior in 1997 according to the Miles and Snow typology of Prospectors, Analyzers, Defenders, and Reactors, and then we examine how the various hospital types altered key strategies following BBA97. Results:Between 1997 and 2000, more than 26% of sampled rural hospitals that did not participate in the swing-bed program in 1997 (44/167) had chosen to do so in 2000, whereas only 3% of those using swing beds in 1997 had eliminated them (12/346). Other strategies such as divestiture of hospital-based nursing homes were related to concurrent swing-bed adoption. Rural hospitals also increased their reliance on formal linkages with external providers of long-term care. Implications:After the BBA97 reimbursement changes, rural hospitals increased their reliance on swing beds and formal linkages to external providers. We observed changes in overall strategy types, away from the Defender and toward the Prospector and Analyzer strategy types. Our findings illustrate the importance of swing beds as a critical buffer for rural hospitals challenged by the uncertainty of the post-BBA97 environment.