Nursing Facilities Competition Assignment Paper
Poor quality nursing home care is a problem in the United States, a problem that threatens the lives and well-being of one of our most vulnerable populations.Nursing Facilities Competition Assignment Paper The competitive structure of the nursing home market may influence the strategies and behaviors nursing homes pursue to capture the resources they need to operate. The goal of this study was to determine whether nursing home quality is related to the level and type of competition present in the market. This study specifically examined whether or not a relationship exists between structural, process, and outcome quality indicators, and (1) the availability of nursing home substitutes, (2) the threat of market entry, (3) the presence of rivalry in the market, and (4) the relationship between the nursing homes and their buyers and suppliers. This study examined secondary data from the Minimum Data Set Plus (MDS +), the On-line Survey Certification of Automated Records (OSCAR), the Area Resource File (ARF), and the Medicaid Reimbursement Survey. Weighted least squares regression analysis was utilized to estimate the relationships between the quality indicators and the different aspects of competition. This study found that some forms of competition are significantly related to nursing home quality performance. The availability of nursing home substitutes, the presence of active certificate of need laws, and the level of excess demand are associated with nursing home quality.Nursing Facilities Competition Assignment Paper
Poor quality nursing home care is a problem in the United States, a problem that threatens the lives and well-being of one of our most vulnerable populations. The competitive structure of the nursing home market may influence the strategies and behaviors nursing homes pursue to capture the resources they need to operate. The goal of this study was to determine whether nursing home quality is related to the level and type of competition present in the market. This study specifically examined whether or not a relationship exists between structural, process, and outcome quality indicators, and (1) the availability of nursing home substitutes, (2) the threat of market entry, (3) the presence of rivalry in the market, and (4) the relationship between the nursing homes and their buyers and suppliers. This study examined secondary data from the Minimum Data Set Plus (MDS +), the On-line Survey Certification of Automated Records (OSCAR), the Area Resource File (ARF), and the Medicaid Reimbursement Survey. Weighted least squares regression analysis was utilized to estimate the relationships between the quality indicators and the different aspects of competition. This study found that some forms of competition are significantly related to nursing home quality performance. The availability of nursing home substitutes, the presence of active certificate of need laws, and the level of excess demand are associated with nursing home quality.
The long-term convalescent health-care industry in the United States faces three well-documented problems: (1) many indigent patients cannot gain access to nursing homes; (2) the quality of nursing home care is often suspect; and (3) the cost of this care is considerable and continues to increase at a worrisome pace.Nursing Facilities Competition Assignment Paper
The Medicaid program, which helps indigent patients gain access to nursing home care by directly reimbursing the homes, is the dominant purchaser of nursing home services in the United States.[1] Nursing home administrators argue that the Medicaid program can induce them to admit more Medicaid patients and provide higher quality if the program pays a higher rate of return on Medicaid patient care. RAND investigated this issue and found that increasing the rate of return on Medicaid patients would induce nursing homes to admit more Medicaid patients, but it would not induce them to increase quality.
Regulation and Nursing Home Behavior
The business of nursing homes is to provide patients with a package of commodities such as medical care, room and board, and social activities. Some of these services are devoted to rehabilitation and others toward lifestyle maintenance. Together these components constitute the quality of care provided to patients.Nursing Facilities Competition Assignment Paper
Nursing homes care for two types of patients: those who finance their care privately and those whose care is paid for through the Medicaid program. However, the sum of private-pay and Medicaid patients cannot exceed a level determined by regulation. A nursing home’s capacity is regulated by the Certificate of Need (CON) cost-containment program. The program attempts to control total industry expenditures by limiting the supply of nursing home beds. CON requires that before an existing home can be expanded or a new one built, the government must certify that the proposed facility is indeed “needed.” Thus the program effectively limits the capacity of existing nursing homes and new entries into the market.
It can be assumed that nursing homes provide private-pay and Medicaid patients with the same level of quality. This assumption follows from the legal restrictions that homes cannot discriminate in the provision of service based on source of payment, and that most nursing home services, such as nursing care, social services, and dietary services are jointly produced for both types of patients and exhibit economies of joint production. Thus, it is both legally and technically difficult to improve the level of services provided to private-pay patients without also improving them for Medicaid patients.
Homes charge private-pay patients what the market will bear; thus, private-pay demand is a function of price and quality. In contrast, homes receive a set Medicaid reimbursement rate for the care of Medicaid patients, and thus Medicaid demand depends only on quality, since Medicaid patients pay zero out-of-pocket expenses.Nursing Facilities Competition Assignment Paper
Because private-pay patients pay a positive price and nursing homes must supply the same level of quality to both types of patients, it can be assumed that quality must be above the minimum level at which Medicaid patients (who pay zero) prefer nursing home care to independent living. It follows, then, that there is considerable demand among Medicaid patients for nursing home care; and the study found that there are indeed long lists of Medicaid patients in hospitals waiting for nursing home openings. Most nursing homes operate well above 90 percent capacity; and in the New York State sample examined in this study, most homes had well over 95 percent capacity.[2]
In sum, the Medicaid program has created a “secondary market” for nursing home care, and CON restricts supply so that there is excess Medicaid demand. Homes charge private-pay patients what the market will bear and receive the Medicaid reimbursement rate for the care of Medicaid patients. The homes use price and quality to maximize profits as they compete for private-pay patients, knowing that they can always fill excess capacity with Medicaid patients at the Medicaid reimbursement rate.
Effects of Policy Actions on Nursing Home Costs and Quality
The study team used econometric modeling to examine a sample of 455 nursing homes in New York State. Since higher quality is produced primarily through labor-intensive activities such as personal contact with patients by employees and highly personalized physical and psychological therapy, policies designed to improve quality are relatively expensive. The modeling showed, for example, that a policy that increases quality 1.3 percent will increase cost by 10 percent. In contrast, cost-containment policies can achieve large savings without producing a large deterioration in quality.
The researchers examined the effects of two critical policies in the nursing home industry: competition and the return allowed on Medicaid patients. With respect to competition, the appropriate market to analyze is the private-pay market, since homes do not compete for Medicaid patients. The analysis showed that increases in competition are associated with higher levels of quality, since this is the way that nursing homes seek to attract more private-pay patients. However, restricting competition would have the effect of reducing costs, because the homes would not have to provide expensive quality improvements to attract patients away from competitors. In sum, increasing competition to promote quality would lead to more costly care, while restricting competition achieves considerable savings without a large sacrifice in quality.Nursing Facilities Competition Assignment Paper
In examining the second policy question, whether the government could purchase increased access to nursing homes for the poor and higher quality as well, the researchers found that there is a quality-access trade-off. Increasing the rate of reimbursement for Medicaid patients would induce nursing homes to admit more Medicaid patients, but it would not lead to higher quality of care, because improving quality is very expensive and is targeted toward the private-pay market.
For more than thirty years the quality of care in nursing homes has been a recurring matter of public concern and debate in the United States. In the 1970s and 1980s researchers presented compelling evidence that the frail and vulnerable recipients of nursing home care were too often neglected, mistreated, or abused and that the system of nursing home regulation and licensure was largely ineffectual, failing to protect residents and to prevent quality problems. 1 In 1986 the Institute of Medicine (IOM) published an influential report that set out detailed recommendations for reforming the regulation of nursing homes, intended to bring about a major improvement in quality of care. Those recommendations were largely accepted by Congress, enacted through the Nursing Home Reform Act as part of the Omnibus Budget Reconciliation Act (OBRA) of 1987, and have since been gradually implemented by the Centers for Medicare and Medicaid Services (CMS, formerly HCFA). 3Nursing Facilities Competition Assignment Paper
It seems that the same quality problems that spurred calls for greater regulation in the 1970s and 1980s are still endemic in many nursing homes today. 4 Nursing home regulation remains the constant subject of policy attention, most recently via the Senate Special Committee on Aging, the Clinton administration’s nursing home initiative, and the U.S. General Accounting Office (GAO), which has issued a stream of reports. 5 The IOM has just revisited nursing home regulation as part of a wider review of long-term care and has concluded that while regulation has brought some limited improvements in nursing home care, further reform is still needed. 6
This paper briefly describes how nursing home regulation has developed in the United States from 1986 to the present and summarizes what is known about the impact of regulation on nursing home care. It then draws on the wider literature on regulation and its impact to outline some characteristics of nursing home regulation that may have detracted from its effectiveness and contributed to its rather disappointing results. The paper concludes that fundamental regulatory reform is needed but that greater attention should be paid to the lessons of regulation in other settings, and more use should be made of research and formative evaluation to improve the effectiveness of nursing home regulation.Nursing Facilities Competition Assignment Paper
The Development Of Nursing Home Regulation
More than 1.6 million Americans live in nursing homes, most of them elderly, frail, and vulnerable persons who are likely to live out the remainder of their lives there. Because of their physical or mental infirmity and their dependence on their caregivers, they are often not able to act as assertive, well-informed consumers. In 1999 the United States spent about $90 billion on nursing home care (about $55,900 per resident), and 60 percent of the cost was borne by states and the federal government through the Medicaid and Medicare programs. 7 The great majority of nursing homes (93 percent) are operated in the private sector, 67 percent of them by for-profit organizations, including a growing number of large corporations whose facilities house thousands of residents. 8
Concern about quality of care in nursing homes can be traced back at least to the 1950s. Before the establishment of Medicare and Medicaid in 1965, there were essentially no federal standards regulating nursing homes, regulation was left up to the states, and standards varied widely. Although federal regulations were enacted once Medicare and Medicaid began to pay for nursing home care, they were inadequate in design, poorly implemented, and often unenforced by the federal and state agencies that shared regulatory responsibility. A succession of studies in the 1970s and early 1980s highlighted continuing serious problems with nursing homes’ quality of care and were one reason that Congress asked the IOM in 1984 to investigate and recommend reforms. 9
The IOM’s 1986 report outlined proposals for a comprehensive and radical reform of regulatory arrangements. 10 The standards for nursing homes were to be revised to make them more focused on quality of care, more detailed and comprehensive in their coverage, and more explicit about the rights of residents. The survey or inspection process used to check compliance with the standards also was to be reformed, to make it less oriented toward paper records and structures and more focused on direct observation of care and communication with residents. A much broader range of enforcement mechanisms was to be introduced, including financial penalties, blocks on payment for new admissions or all residents, provisions to take over the management of failing homes, and ultimately termination of participation in Medicare/Medicaid. These reforms passed Congress with broad bipartisan support and were enacted as the Nursing Home Reform Act, part of OBRA 1987.Nursing Facilities Competition Assignment Paper
It took the CMS (then HCFA) three years to put into operation the regulations to implement OBRA 1987 and seven years to implement the regulations needed to put its regulatory enforcement mechanisms in place. Over that time political support for the OBRA 1987 reforms slackened, and although a number of proposals were brought forward in Congress in the mid-1990s aimed at repealing or weakening nursing home regulation, none were successful. 11 Even once the reforms were in place, a succession of GAO reports highlighted continuing quality-of-care problems in nursing homes and major flaws in OBRA’s implementation and the management of nursing home regulation by the CMS. In response, the Clinton administration launched a nursing home initiative in 1998 aimed at improving the effectiveness of regulation.
The current regulatory arrangements are administratively complex but conceptually straightforward. The CMS is responsible for producing and maintaining federal regulations with which all homes that wish to participate in Medicare and Medicaid must conform. The state survey, licensing, and certification agencies are responsible for surveying or inspecting nursing homes to check their compliance with the regulations, investigating complaints, and reporting the results to the CMS. When deficiencies are identified, state agencies and the CMS regional offices share responsibility for taking enforcement action to make sure that nursing homes deal with the problems and come back into compliance. The CMS funds most of the costs of Medicare/Medicaid certification and oversees the performance of state survey agencies to make sure that the federal regulations are implemented appropriately. States also have their own licensing requirements, with which all homes (not just those participating in Medicare and Medicaid) must conform. State regulations may parallel or exceed federal requirements and generally have separate provisions for licensing nursing homes, undertaking surveys or inspections, investigating complaints, identifying deficiencies, and taking enforcement action.Nursing Facilities Competition Assignment Paper