|
Items in cart [0] |
Questions? Call 888-624-8373 |
| Copyright © 2009. National Academy of Sciences. All rights reserved. Terms of Use and Privacy Statement |
Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 492
For-Profit Enterprise in Health Care. 1986.
Nabonal Academy Press, Washington, D.C.
The Changing Structure of the Nursing Home
Industry and the Impact of Ownership on Quality,
Cost, and Access
Catherine Hawes and Charles De Phillips
INTRODUCTION
Many observers view the increasing "cor-
poratization" of American health care as the
most significant development since the pas-
sage of Medicare and Medicaid. While there
is general consensus about the trend toward
corporatization, there is little agreement about
the impact of this development on the cost,
quality, and accessibility of American health
care. Recently, the for-profit segment in the
modern hospital sector has become prominent
with the rapid growth of proprietary corporate
chains. The nursing home sector has, how-
ever, been dominated by proprietary provid-
ers for decades, and publicly held corporations
owning and operating nursing homes have been
prevalent since the late 1960s.
Until fairly recently, nursing homes have
not attracted substantial attention from re-
searchers, except for studies on costs. Rela-
tively few studies have focused on quality, and
even fewer have investigated accessibility.
Virtually none have focused on nursing home
"chains," that is, corporations owning and op-
erating nursing homes in a number of states.
There are, however, a few empirical studies
that address the impact of the type of own-
ership on nursing homes. They provide
suggestive information about the incentive
structure of these ownership forms and about
what policymakers can expect if current trends
continue.
This paper will explore what is known about
the impact of ownership and the corporatiza-
tion of health care in the nursing home in
Dr. Hawes is with the Research Tnangle Institute,
and Dr. Phillips is a member of the faculty of political
science at the University of North Carolina at Chapel
Hill.
492
dustry. It will discuss the history of nursing
homes, identify the current structure of the
industry and the public policies that have con-
tributed to this structure, and indicate poten-
tial results if current ownership trends persist.
Finally, it will attempt to apply what is known
about developments in nursing homes to the
hospital sector.
Nursing home care is the third largest seg-
ment of the health care industry. It will con-
tinue to grow in prominence with increasing
longevity, shifts in morbidity, and changing
demographic, social, and economic patterns in
the family. Given present demographic trends,
(in particular, the dramatic growth of the 85
years of age and older segment of the popu-
lation), the United States will need to increase
its nursing home bed supply by an estimated
57 percent between 1980 and the year 1995
to keep pace with the current level of utili-
zation (Harrington and Grant, 1985; Doty et
al., 1985; Lane, 19841. Some experts predicted
the need for an additional 1 million to 1.5 mil-
lion beds by the year 2000, based on current
utilization, prior rates of increase in utiliza-
tion, and estimated rates of dependency among
the elderly (Rice, 1984; Scanlon and Feder,
1984; U. S. DHHS, 1981b; Weissert, 1985~. By
2040, 4.3 million elderly are expected to be
institutionalized (Doty et al., 1985~.
This apparent need for additional long-term
care beds presents policymakers with an im-
portant opportunity to affect the future shape
of the long-term care system. The debate about
whether proprietary interests should be per-
mitted to remain in the nursing home busi-
ness, however, "is essentially moot" (Vladeck,
1980~. For-profit interests own more than 7S
percent of the nursing homes nationwide and
are rapidly expanding in the home health and
life care markets. Yet, today's public policy
decisions on reimbursement, health planning,
OCR for page 493
THE NURSING HOME INDUSTRY
licensure, and the use of low-interest bonds
for new construction can affect the structure
of tomorrow's industry. Thus, the possibility
exists for public policies to significantly affect
the structure of the health care sector.
Public policymakers have a clear stake in
the emerging shape of the nursing home in-
dustry. First, government has a fundamental
regulatory role as the primary purchaser of
formal long-term care services. It dispenses
more than half of the dollars spent for nursing
home care and assists in paying for nearly 70
percent of all the patients in nursing homes.
As such, government has a responsibility to
ensure that its funds are well spent.
Second, the regulatory system bears a sig-
nificant responsibility for the quality of nursing
home care because of the frailty of most con-
sumers. Consumers needing long-term care
generally super from a bewildering array of
chronic physical, functional, or mental disa-
bilities. In fact, studies indicate that the nurs-
ing home population is becoming even more
aged and disabled, and this trend is likely to
continue (GAO, 1982, 1983b; Manton, 1984~.
These consumers have only a limited ability
to choose rationally among providers of long-
term care. They have poor access to accurate
information, limited ability to evaluate the in-
formation, and multiple disabilities that re-
strict their mobility and ability to switch easily
from one provider to another. Thus, consum-
ers have little to influence facilities' decisions
and behavior.
Third, most nursing home patients lack ad-
vocates to represent their interests. An esti-
mated 30 percent of the patients have no living
immediate family members, and as many as
half have no relatives nearby (Broody, 1977;
U. S. Senate Special Committee on Aging,
1974~. While physicians may recommend
nursing home placement, they seldom choose
the facility. Placement decisions for many in-
rlividuals entering nursing homes are made by
case workers and hospital discharge planners.
These individuals may have the best interest
of the patient at heart, but they labor under
a set of incentives in which locating an empty
bed-in any facility that will accept the pa-
t~ent is a strong priority. Even when family
members are present, they too labor under
the burden of needing to locate an available
493
bed while lacking useful information on the
comparative merits of different providers.
As a result, government's role in quality as-
surance is essential. Moreover, it is crucial.
Despite considerable improvement in nursing
homes since the inception of Medicare and
Medicaid, substandard quality of patient care
and quality of life remain serious problems
nationwide. Inadequate nutrition, dehydra-
tion, overdrugging, excessive use of physical
restraints, failure to provide prescribed ther-
apies, inattention to the psychosocial needs of
nursing home residents, and ineffective gov-
ernment regulatory activity are but a few of
the problems commonly cited (Mech, 1980;
Kane, 1983; Kane et al., 1979; Himmelstein
et al., 1983; Zimmer, 1979; Ohio Nursing Home
Commission, 1979; Virginia Joint Legislative
Audit and Review Commission, 1978; Men-
delson, 1974; Texas Nursing Home Task Force,
1978; AFL-CIO, 1977, 1983b; U.S. Senate
Special Committee on Aging, 1974, 1975a,b;
U.S. DHEW, 1975a; Ray et al., 1980; Ous-
lander et al., 1982; California Health Facilities
Commission, 1982; California Commission on
State Government Organization and Econ-
omy, 1983; Illinois Legislative Investigating
Commission, 1983; Missoun State Senate, 1978;
New Jersey State Nursing Home Commission,
1978~.
Furthermore, nursing home costs have es-
calated at an even more dramatic rate than
costs for hospital care. Discrimination against
recipients of Medicaid and those individuals
with heavy-care needs is widely acknowledged
(Harrington and Grant, 1985; GAO, 1979,
1983a,b; Feder and Scanlon, 1981; Scanlon,
1980a,b; Vogel and Palmer, 1983~. Given these
problems in quality, cost, and accessibility of
nursing home care, information about the im-
pact of ownership is essential to rational pol-
icymalcing in long-term care, particularly given
the ability of public policies to restructure the
industry.
PUBLIC POLICY AND THE GROWTH OF
NURSING HOMES
The nursing home industry is generally seen
as an outgrowth of Medicare and Medicaid,
but its roots are older and more complex. The
industry is heir to both the almshouse and the
OCR for page 494
494
hospital. Indeed, nursing home policy com-
bines elements of health, welfare, and housing
policy in a schizophrenic and nearly uncon-
trollable amalgam of increasing cost, substan-
dard care, and discrimination against both those
most in need of care and those least able to
pay for such care. It has also produced a large
new industry that grew and became profitable
largely by providing services to the infirm and
disabled poor.
Our current long-term care system is fi~n-
damentally a creature of government policy.
Yet, nursing homes and now home health, re-
tirement, and life care communities have rarely
been directly addressed as policy issues of some
consequence. As Vladeck (1980) observes,
By and large, nursing home policy has been made
not only with limited foresight, but largely by peo-
ple who, at Me time, were pumanly concerned with
doing something different. It has, been an aPcer-
thought, a side eject of decisions directed at over
problems.
The nursing home industry has grown as a
Poor Laws and Poor Houses2
From colonial times to the Great Depres-
sion, public policy in the United States fol-
lowed the tradition of the English poor laws,
leaving care of the destitute to local govern-
ments and relying almost totally on "indoor
relief' rather than direct income assistance.
For the aged and infirm poor in America, this
FOR-PROFIT ENTE~SE IN HEALTH CAM
meant that the only form of public support was
institutional, largely in almshouses and poor
farms Bedeck, 1980; Dunlop, 1979~. There
was, however, private support for the aged and
infirm during this period. Approximately the
same number of individuals resided in chari-
table private homes for the aged, sponsored
largely by immigrant and religious groups, as
lived in the poor homes.3
Taken together, the almshouses, poor farms,
and charitable homes for the aged housed ap-
proximately 100,000 elderly Americans. Nearly
as many aged individuals, an estimated 70,000,
were inmates of mentalhospitals (Vladeck, 1980;
Dunlop, 1979; Markus, 1972; Waldman, 1983~.
Conditions in the mental institutions were un-
doubtedly wretched; however, it was the
abominable conditions in almshouses and the
destitution of 7 million aged Americans that
commanded policymakers' attention during the
1920s and early 1930s. These concerns shaped
the Social Security Act and helped frame the
growth of what became the nursing home in
result of a multiplicity of factors. It has thrived Y
on the infusion of public dollars (through a
variety of programs, a growth in need due to
changes in demographics and shifts in mor
bidity patterns toward chronic diseases, and
the interplay of policies aimed at other insti
tutions (e g., admshouses, mental institutions,
and acute care hospitals). In the process of
growing, the industry has also fundamentally
changed. Some of the most profound changes
include an increasingly medically oriented set
ting, a shift from smaller to larger facilities, a
move away from government-owned and vol
untary homes to proprietary ones. Most re
cently, the industry has witnessed a growing
concentration of ownership in mult~facility
chains that are diversifying vertically as well
as horizontally.
Social Security and Old Age Assistance
The original entry of proprietary providers
into the business of owning and operating
nursing homes was an unforeseen and prob-
ably unintended consequence ofthe Social Se-
cunty Act of 1935, which also established a
federal grants-in-aid program to the states for
old age assistance (OAA). OAA was a need-
based (means-tested) cash grant program de-
signed to provide income support to the el-
derly poor who would not yet draw sufficient
benefits from the old age insurance (OAI) sec-
tion of the act. Because of the scandals about
almshouses and poor farms, however, the act
prohibited payment of the cash grant to any
"inmate of a public institution."
In effect, the framers of Social Security de-
termined that OAA would not be used for the
maintenance of almshouses. These restrictions
enabled new OAA beneficiaries to turn else-
where for care and assistance when they be-
came incapable of caring for themselves (or
being cared for) at home. Meager as most of
the states' OAA payments were, they still pro-
vided the elderly with sufficient purchasing
power to obtain institutional care without be
OCR for page 495
THE NURSING HOME INDUSTRY
coming wards of the cities or counties. The
existing nonprofit institutions were accus-
tomed to relying on payments from residents,
supplemented by charitable contributions. As
the Great Depression deepened, fewer resi-
dents and their families were capable of paying
their share, and charitable contributions also
began to dwindle. Nevertheless, voluntary or-
ganizations were slow to appreciate the op-
portunity that OAA provided. By the end of
the 1930s, the total number of individuals these
facilities served was nearly the same as before
the onset of the depression (Vladeck, 1980;
McClure, 1968; Thomas, 1969~.
Private board and care homes for pensioners
had existed for some years, but the Social Se-
curity Act's transfer of cash into the hands of
the aged helped begin the transformation of
this sector into a predominantly proprietary
nursing home industry. The new flow of in-
come to older people allowed private homes
to provide some health services or supervision
for those in need rather than just board and
care. In addition, the economic problems en-
gendered by the depression encouraged many
individuals-whose only resources were their
labor and the possession of a house to enter
the business of providing "nursing" care in
their homes.
While the business was tiny by comparison
to today's industry, the combination of OAA
payments with the growing proportion of the
aged in the population spurred growth of the
industry, particularly the proprietary "mom
and pop" sector (U.S. Senate Committee on
Labor and Public Welfare, 1960; McClure,
1968; Thomas, 1969~.4 As Table 1 indicates,
the period between 1939 and 1950 was one of
significant growth, a certain sign of the impact
of increased purchasing power among the el-
derly as a result of Social Security and OAA.
Post-World War II and the Eisenhower
Era
After World War II, developments in the
hospital sector affected nursing homes. Chronic
disease hospitals began to upgrade their ser-
vices to provide rehabilitative care. In addi-
tion, some acute care hospitals added beds to
provide lower-cost care for patients needing
subacute or extended recuperative care (Har
495
rington and Grant, 1985~. Although hospital-
affiliated facilities did not capture a significant
share of the market, they opened the way for
the entrance of the medical profession into
long-term care and for the eventual develop-
ment of professional standards in what had pri-
marily been a board and care industry (Lane,
1981, 1984; Dunlop, 19791.
This transformation of the nursing home in-
dustry was furthered by the extension of Hill-
Burton grants to public and nonprofit orga-
nizations for the construction of nursing homes.
Apart from minimal state licensing laws, there
were no regulatory standards for what kind of
care these nursing homes should provide. In
administering Hill-Burton, the Public Health
Service (PHS), formulated the first standards
on physical plant design and construction as
well as staking patterns in nursing homes, fur-
ther transforming these institutions into more
medically oriented settings. They now be-
longed to health as well as welfare policy (Vla-
deck, 1980; Lane, 1984~.
Two developments during the 1950s had a
major impact on the growth and structure of
the industry and attracted the first speculators
to investment in nursing homes. The first was
a vendor payment system, authorized under
the 1950 amendments to the Social Security
Act and expanded in 1956. This provided for
federal matching funds to the states for direct
payments to nursing homes (the "vendors") for
care provided to OAA recipients. The second
was increased availability of government-backed
loans, through the Small Business Adminis-
tration (SBA) and the Federal Housing Act
(FHA), for nursing home construction and
conversion (Markus, 1972~.
The vendor payment system and increased
government dollars available for nursing home
care helped regularize payments, an attractive
feature for businessmen. Perhaps most im-
portant for the long-run shape of the industry,
it gave nursing home providers an identifiable
political entity to be lobbied for rate increases
and favorable regulations. The vendor pay-
ment program thus shaped a system in which
the cost, quality, and level of services are de-
cided in a transaction between vendors (pro-
viders) and the state, creating the politics of
long-term care.
The availability of loans for nursing home
OCR for page 496
496
TABLE 1 Nursing Home Statistics by Yeara
FOR-PROFIT ENTE~SE IN HEALTH CAM
Percentage
Change Annual
from PAor Compounded Persons in
Number of Number Reported Rate of Number Nursing Average Facility
Year Facilitiesb of Bedsb Year Changer of Beds ~Homee Occupancy Ratesb
1939 1,200 25,000 - 35%
1950 9,OOOf 250, 0CCi 900 296,783
1961 9,900 510,180 104 14.7~ 469,717 80
1963 12,800 568,560 11 5.6 90
1969 14,998 879,091 55 7.5 972,514h 91
1973 15,737 1,175,865 34 7.5 92
1976 16,426 1,317,909 12 3.9 93
1980 17,737 1,479,000a 12 2.9 1,372,019a 1,426,371 95
1982 1,515,000 2.4 1.2 1,428,960a 95 ~
1983 1,450,413a 95 +
aThe discrepancies in the estimates are a result of several factors. For example, in many instances one nursing
home that is certified to provide both skilled nursing care and intermediate care may be "double-counted." Also,
some nursing homes also operate residential care beds, and these may sometimes be erroneously counted as
nursing home beds. Thus, accurate estimates are difficult to achieve. Ibe Aging Health Policy Center (AHPC)
data were colllected directly from the state licensing agencies and may be the most accurate.
b Date from the National Center for Health Statistics (NCHS).
CRate computed by Montgomery Securities (1983~.
Data compiled by the AHPC, University of California at San Francisco (Harrington and Grant, 1985~.
eData from U. S. Bureau of the Census, compiled by and reported in Scanlon and Feder (1984~.
fData from Dunlop (1979~.
"Rate of increase Tom 1939 to 1961.
hData Tom 1970.
construction and conversion through the SBA
and FHA also had a major impact on the struc-
ture of the industry. Hill-Burton construction
grants were only available for nonprofit pro-
viders, but SBA and FHA loans could be made
to for-profit entities. Certainly these funds had
an impact on the expansion of the proprietary
sector, helping not only to increase bed supply
but also to shift the facilities from converted
homes with relatively few beds to the larger,
more modern, single-purpose building that is
the norm today. Additionally, it made builders
and real estate speculators aware of a new and
potentially very profitable market for invest-
ment nursing homes. As Lane (1984) ob-
serves, "This capitalization of the profession
by prudent real estate businessmen seeking a
secured return on their investment helps to
explain the ~ronrietan~ n~hlr~ of the inAllc_
try.
,7 ~ _, _ _~ _ - ,._ ~,~ ~
Direct payment to vendors and construction
loans attracted the first significant group of
proprietary operators, many of whose names
eventually became synonymous with nursing
home scandals the Bergmans, Hollanders,
Kosows, and the first rumored involvement of
He Mafia in the industry (Mendelson, 1974~.
These public policies also resulted in signifi-
cant increases in government spending and
growth in the number of nursing home beds.
In 1950, there were fewer than 9,000 nursing
homes with approximately 250,000 beds (Dun-
lop, 1979~. Total spending for nursing home
care was just $187 million, or 1.5 percent of
national health expenditures, and government
paid only 10 percent of the nursing home ex-
penditures (Gibson, 1979~. By 1960, there had
been a 181 percent increase in total national
spending on nursing home care, and govern-
ment was paying approximately 22 percent of
that total.
Even with this expansion, the grown in beds
was not sufficient to keep pace with the in-
creasing numbers of elderly who needed long-
term care. The U. S. General Accounting Of-
fice (GAO) estimated that by the early 1960s,
OCR for page 497
THE NURSING HOME INDUSTRY
the shortage of adequate nursing home beds
was between 25O,OOO and 500,000 (Elliott, 1969;
Spitz, 1976~.5 Thus, one of the major concerns
in Congress with the passage of Medicare and
Medicaid was the availability offunds for long-
term care.
The Development of Medicare and
Medicaid
During the decade following the 1965 pas-
sage of Medicare and Medicaid, there was a
dramatic expansion in the supply of nursing
home beds and an even more dramatic esca-
lation in costs. New facilities were built, and
a more sophisticated set of owners emerged,
including the multistate, multifacility systems
or chains. These developments were largely a
product of four factors: (1) the availability of
funding; (2) the method of reimbursing facil-
ities; (3) increasing demand; and (4) federal
health and safety regulation.
The Expansion of Coverage
The original framers of Medicare were well
aware that the inclusion of nursing home ser-
vices could destroy the fiscal viability of the
system, particularly if it covered the kind of
long-term custodial care most nursing homes
were then providing. Despite this, substantial
inflation in hospital rates during the 1950s and
early 1960s made it desirable to have less costly
alternatives than hospitals for patient convales-
cence (interview with Wilbur Cohen, personal
communication, 1980; U.S. Senate Commit-
tee on Finance, 1970; Vladeck, 19801. Thus,
as originally conceived, Medicare covered only
hospital care, but was amended to add cov-
erage for convalescing patients in "extended
care facilities" (ECFs). With anticipated daily
costs about half those of convalescent care in
a hospital, ECFs were seen as a cost-efficient
form of institutional care.
Although the extended care provision of
Medicare was soon to haunt its framers, its
impact pales beside that of another amend-
ment to the Social Security Act, Title 19 or
Medicaid. Medicaid attracted little attention
from policymakers, and coverage of skilled
nursing home care was included almost by de-
fault again through vendor payments and
497
without much definition or a budgetary limit.
This coverage (and the eventual extension to
intermediate care as well) provided the finan-
cial fuel for the further growth of the nursing
home industry.
With the passage of Medicare and Medi-
caid, sufficient funds were available to many
of the elderly for much pent-up need to be
translated into demand for and utilization of
nursing home care. It was not, however, only
the infirm aged residing in the community who
came to demand nursing home care. Nursing
home care also emerged as a substitute for
housing (and some care or supervision) pre-
viously provided to many of the elderly in other
settings, particularly mental institutions (Dun-
lop, 1979; Manard et al., 1975; V-ladeck, 1980;
Scanlon and Feder, 1984; Barrington and
Grant, 1985~. One observer estimated that 25
percent of the increase in nursing home uti-
lization between 1960 and 1970 can be attrib-
uted to the deinstitutionalization or diversion
of individuals from mental institutions into
nursing homes (Morton Research Company,
1982).
Consumers of care and their families had a
multitude of reasons for choosing nursing homes
over other forms of institutional care. But it
was also in the interest of the states and lo-
calities. In these other settings, most of the
costs were borne by state and local govern-
ments, while transfer to a nursing home usu-
ally meant the state could collect the federal
matching hinds for the care of these individ-
uals in nursing homes under the Medicaid pro-
gram. As a result of these diverse factors,
including reductions in hospital lengths of stay,
the percentage of elderly persons in nursing
homes rose 58 percent in the decade between
1950 and 1960 and 107 percent between 1960
and 1970.
A combination of factors, therefore, fueled
the demand for and utilization of nursing home
beds. Increased but unevenly distributed ex-
penditures under Kerr-Mills led to significant
grown, but it was the passage of Medicare
and Medicaid in the mid-1970s, in conjunction
with demographic trends, that led to substan-
tially extended demand by the elderly for
nursing home care. From the viewpoint of po-
tential providers, expansion was a result not
only of increased demand, but also the in
OCR for page 498
498
creased availability of public reimbursement
and the attractiveness of the rates set up under
these new programs, a result of the policy-
makers' desire to assure substantial provider
participation. While they expanded eligibility,
Medicare and Medicaid could accomplish little
if too few individuals and organizations were
willing to provide services to program bene-
ficiaries. To attract providers to the program-
and increase the supply of nursing home beds-
the federal government pursued two basic pol-
icies, one related to reimbursement and an-
other to regulation.
Increased Reimbursement Rates. First,
Medicare adopted a cost-based reimburse-
ment policy very similar to that it employed
for hospitals. Providers were basically reim-
bursed for their reported costs. The formula
placed no ceiling on reimbursement rates, and
variations in reported costs between providers
were ignored. In addition, the program pro-
vided proprietary nursing homes a "profit"
based on their net invested equity in the fa-
cility. Finally, the American Hospital Associ-
ation (AMA) lobbyed effectively for Medicare
to reimburse hospitals for mortgage interest
as well as depreciation of capital equipment,
including the facility. This was extended to
nursing home reimbursement. As a result,
investors were virtually assured of covering
their mortgage payments-and having a pos-
itive cash flow (from depreciation) as well in
the first years of the mortgage through the
Medicare program. They were also virtually
assured of having their costs covered as well
as receiving in effect a guaranteed profit (Shul-
man and Galanter, 1976; Vladeck, 1980; Ohio
Nursing Home Commission, 1979; Washing-
ton Senate, 1978~.
Lenient Regulatory Posture. Medicare also
adopted a policy of easing nursing homes' en-
trance into the program. Although enacting
mandatory minimum health and safety regu-
lations for facilities participating in Medicare,
the federal government estimated that few fa-
cilities could actually meet even the minimum
standards. Consequently, granted nursing
homes were given participatory status in Med-
icare and Medicaid if they were in "substan-
tial" (rather than full) compliance with the new
FOR-PROFIT ENTERPRISE IN HEALTH CARE
federal minimum health and safety standards.
The homes simply had to present to the survey
and certification agency a plan for correcting
their violations in order to be certified and
receive payments.
This lenient regulatory posture, combined
with open-ended, full-cost reimbursement, a
guaranteed profit factor, and interest plus de-
preciation for capital reimbursement in a pro-
gram financially supported by the federal
government, made investment in nursing
homes very attractive. In addition, govern-
ment fielding and the aging of the population
ensured the industry of a ready supply of cus-
tomers. Thus, government policies eliminated
much ofthe risk generally associated with most
investments and nearly all new ventures while
promising substantial profits to those with the
knowledge and ability to manipulate the sys-
tem. As a result, in less than a decade the
industry expanded its total supply of beds from
approximately 460,000 (in 1965) to more than
1.1 million beds (by 1973) an increase of 139
percent in less than a decade.6
Expenditures grew even more rapidly. In
1950, total expenditures for nursing home care
were less than $190 million, with government
paying only 10 percent of that total. By 1960,
government paid 22 percent of a total of $526
million. By 1965, just before the onset of Med-
icare and Medicaid, expenditures totaled $1.328
billion, an increase in just 5 years of 153 per-
cent. Between 1960 and 1974, expenditures
on nursing home care grew approximately 1400
percent (U.S. Senate Special Committee on
Aging, 1974~. By 1978, the nation spent $15.8
billion on nursing homes, with government
paying 53 percent of the total (Gibson, 1979~.
And by 1982, expenditures for nursing home
care exceeded $27 billion annually with gov-
ernment paying nearly 55 percent of the total
(GAO, 1983b). In 1984, expenditures on nurs-
ing home care exceeded $32 billion with gov-
ernment paying 49 percent (Levis et al., 1985~.
The Emergence of Nursing Home Chains
At the same time that the industry was grow-
ing and expenditures were skyrocketing, the
pattern of ownership and control in the in-
dustry was undergoing a significant change.
Unlike the hospital sector, the proprietary
OCR for page 499
THE NURSING HOME INDUSTRY
nursing home firms industry has been preva-
lent and growing since the 1930s. The trend
away from government and nonprofit facilities
accelerated. In 1969, 64.5 percent of all nurs-
ing home beds were in proprietary facilities.
By 1980, 81 percent of all the facilities and 69
percent of the beds were proprietary. During
the same period, the proportion of beds in
nonprofit facilities decreased from 25.8 per-
cent to 22. 7 percent, with government owning
only 8 percent (U. S. National Center for Health
Statistics, 1984~. But the most significant de-
velopment in the immediate post-Medicare
period was the development of proprietary
corporate nursing home chains. In 1966, only
a handful of firms owning nursing homes were
registered with the Securities and Exchange
Commission (SEC). By 1969, that number had
expanded to 58 and by 1970 had reached nearly
90 (Spitz, 1976~.7
The post-Medicare need for capital was
enormous because of the demand for new beds.
New nursing home construction was needed
to cope with existing bed shortages as well as
to replace obsolete facilities that were often
converted mansions, farmhouses, hotels, and
motels. One way to secure capital for nursing
home expansion was borrowing. Some owners
calculated that once they had enough for a
down payment on their first home (with in-
terest and depreciation as part of the govern-
ment reimbursement rate), government
revenues could be expected to cover the cost
of a first mortgage. The same was true for sec-
ond-, third-, and even fourth-position mort-
gages. With few fiscal controls, the program
provided virtually open-ended reimburse-
ment for Medicare patients. Moreover, the
owners could use the capital generated by these
additional mortgages for whatever purposes
they chose. Many used them to pyramid their
nursing home holdings. With Medicaid, sim-
ilar opportunities existed in the states through
both reimbursement systems modeled on
Medicare and through "flat-rate" systems. Un-
der the latter methods, nursing home owners
received a set fee for each Medicaid patient
day regardless of what they actually spent
on patient care. Many owners used part of
these fiends to purchase new facilities, pyra-
miding their acquisitions on current holdings.
Publicly held nursing home chains had even
499
more options for financing new growth. Going
public with the sale of stock was an alternative
to borrowing. In addition, a public market for
a company's stock enhances its ability to attract
borrowed funds, since the stock can be offered
as collateral to secure loans. As it turned out,
the stock market proved to be a very successful
new source of capital for the nursing home
industry. In 1969 alone, 40 nursing home cor-
porations sold stock worth $340 million.
During the late 1960s, the "Fevered Fifty,"
corporations owning or planning to own nurs-
ing homes, emerged as the "hottest" stocks on
the market. In a 1969 article in Barron's, I.
Richard Elliott, Jr. (1969) explained the phe-
nomenon:
Of late . . . fal kind of frenzy seems to grip the stock
market at the merest mention of those magic words:
"convalescent care," "extended care," "continued
care." All euphemisms for the services provided by
nursing homes, they stand for the hottest invest-
ment around today. Companies never before near
a hospital zone from builders like IlTs Sheraton
Corporation, National Environment, and Ramada
Inns, to Sayre and Fisher . . . have been hanging
on the industry's door. "Nobody, a new-issue un-
derwriter said the other day, "can lose money in
this business. There's just no way."
Even while the industry was telling state
legislatures that it faced bankruptcy if Medi-
caid rates were not dramatically increased, some
nursing home owners were promoting them-
selves on Wall Street as the most profitable
investment around. According to stock pro-
spectuses issued by some publicly held chains,
the guaranteed government revenue and the
growing number of elderly combined to pro-
duce an expected return on investment of at
least 20 to 25 percent per year. These potential
profits for the parent corporations were to be
further augmented by the development of sub-
sidiaries that would sell ancillary goods and
services to the nursing homes such as phar-
maceuticals, food service, laundry, manage-
ment, real estate development, and
construction. The reported puce/ean~ings ra-
tios of the new nursing home chains were as
much as 40 times that of blue chip stocks. For
instance, in 1969 the pricelearnings multiple
for Bernard Bergman's Medic-Home chain was
179; for Unicare, another major nursing home
chain, the multiple was 700 (Elliott, 1969~.
OCR for page 500
500
The boom in nursing home stocks, however,
was relatively brief, and the bust was spectac-
ular. By 1971-1972, the stock prices had fallen
far below their high marks of 1969. ^Medicen-
ters of America, whose price per share had
reached almost $60 during the late 1960s, was
selling at less than $4 by the mid-1970s. And
the same decline was true for all the chains.
Four Seasons Nursing Centers, certainly the
most publicized of the chains and the first to
list its shares on a major exchange, started out
as a housing construction company. Its stock
ran up to nearly $100 per share in 1969. By
1970, when the SEC suspended trading, it was
selling for 6¢ per share.
The bankruptcy of Four Seasons was a result
of massive fraud, with the president, partners
of the corporation's accounting firm, ancl two
officers of a brokerage firm indicted for secu-
rities violations. This stock fraud was one factor
in cooling off the market for nursing home
stocks. Continuing scandals about poor care
and patient abuse also dampened investors'
enthusiasm. But perhaps the most important
factor involved a serious miscalculation about
the role of Medicare in paying for nursing home
care.
A surprising number ofthe new nursing home
entrepreneurs, like many of their investors and
an unhappy number of Social Security recip-
ients, initially assumed that Medicare and its
unlimited, cost-plus reimbursement system
would finance most of Me nursing home care
of the nation's elderly. In fact, given the orig-
inal Medicare limitations and further restric-
tions on eligibility and coverage introduced
during the Nixon administration, Medicare paid
for relatively little of the nation's expenditures
on nursing home care. Table 2 illustrates the
actual funding pattern that has emerged.
The predominantly extended-care (or sub-
acute care) market funded by Medicare, which
was anticipated by the nursing home entre-
preneurs, never materialized. The mainstay of
the nursing home market proved to be the
long-stay resident-an individual suffering from
chronic rather than acute diseases and disa-
bilities, unable to pay for her or his own care,
and unable to qualify for Medicare coverage.
And Medicaid was not as uniformly generous
a payer as Medicare.8
Despite this, it was the Medicaid program
FOR-PROFIT ENTERPRISE IN HEALTH CARE
TABLE 2 Nursing Home Expenditures by
Payer (percentage)
Payer 1981 1982 1983 1984
Medicare
Medicaid
Other government
Private insurance
Out-of-pocket
1.7 1.9
49.8 45.8
4.6 4.5
0.8 1.0
43.2 46.0
1.7 1.9
44.2 43.4
4.1 4.0
0.7 0.9
48.3 49.4
SOURCE: Waldo and Gibson, 1982; Levit et al.,
1985.
that removed the lid from expenditures on
vendor payments to nursing homes. The initial
legislation basically left the decision on how
to reimburse nursing homes almost entirely to
the states. Some provided generous rates un-
~ler cost-based systems similar to the Medicare
payment program; others provided a fixed (or
"flat") rate for all facilities. Such fixed rates
were independent of actual nursing homes'
costs, differences in the severity of patient case
mix, and quality of care. In general, however,
Medicaid rates, tied to state welfare programs,
were lower than Medicare rates. Yet Medicaid
was an open-ended program, paying for the
care of all eligible program beneficiaries, and
its eligibility.
The limitations on Medicare coverage, ret-
roactive claim denials, and payment and eli-
gibility limitations imposed by most Medicaid
programs made the nursing home industry less
attractive financially. In addition, after the rapid
expansion in bed supply during the initial in-
vestment euphoria, many nursing home beds
were empty by the early 1970s, further con-
tributing to some homes' financial difficulties.
During this period, many nursing homes sur-
vived and prospered by either lowering ex-
penditures (often by cutting back on food and
staffing) or by engaging in real estate manip-
ulations (see Ohio Nursing Home Commis-
sion, 1979; New York State Moreland Act
Commission, 1975; and Shulman and Galan-
ter, 1976~.
The effects of this situation were varied. First,
conditions in nursing homes continued to be
a cause of concern for consumers and policy
OCR for page 501
THE NURSING HOME INDUSTRY
makers. Many attributed seriously substan-
dard care not only to the failure of the regulatory
system but also to the incentives inherent in
many Medicaid reimbursement policies, par-
ticularly "flat-rate" systems (U. S. Senate Com-
mittee on Finance, 1912~. Second, the
trafficking in nursing home real estate that
is, the sale and resale of nursing homes as
well as inflated lease and rental charges arti-
ficially increased the cost of providing care.
Nursing home chains slowed their rate of
growth. From 1969 through the mid-1970s,
the market share of the major multistate nurs-
ing home chains remained relatively stable.
Policy changes in the 1970s, however, would
significantly alter the structure of the industry.
In summary, four factors led to the creation
of a nursing home sector and its expansion
between 1930 and 1970: (1) increased demand
resulting from shifts in mortality and morbid-
ity, as well as the substitution of care in nurs-
ing homes for housing that had been provided
to the elderly in other institutional settings,
such as almshouses, poor farms, and mental
hospitals); (2) increased funds available to pay
for such care through government programs
such as OAA and Social Security payments,
Kerr-Mills, and finally :\Iedicare and Medi-
caid; (3) favorable reimbursement rates and
payments made directly to the vendors of
nursing home services; and (4) a lenient reg-
ulatory posture toward nursing homes.
PUBLIC POLICY CHANGES AND THE
GROWTH OF NURSING HOME CHAINS:
THE 1970s AND 1980s
The dominant trend in the nursing home
industry during the 1970s and 1980s has been
increasing concentration and corporatization
of ownership. This transformation has been
stimulated by changes in reimbursement and
regulatory policy, health planning restrictions
on bed supply, easier access for "chains" to
expansion capital, and tax policies. Between
1982 and 1983, the 25-30 largest chains in-
creased their control of total beds by another
15 percent. Although the holdings of chains
remained relatively stable during the early
1970s, the late 1970s brought about a spate of
merger and acquisition activities. Between 1972
and 1980, with most of the activity occurring
501
after 1976, the three leading chains dramati-
cally increased their control of nursing home
beds and facilities. Beverly Enterprises in-
creased its facilities by 600 percent, ARA its
holdings by approximately 250 percent, and
Hillhaven by 200 percent. This growth pattern
far outdistanced the growth rate in the total
number of nursing home beds and facilities,
which was only 18 percent during the same
period. The Modern Healthcare annual sur-
veys of multifacility systems show that be-
tween 1979 and 1982, the major investor-owned
chains increased the proportion of all nursing
home beds they controlled by 50 percent.
Some observers, including leaders of some
of the major chains, predict that within the
next 5 years, half of all nursing homes will be
operated by proprietary chains, with the ma-
jority controlled by Me 5 to 10 largest chains
(LaVioleKe, 1983~. Certainly, the growth rate
of the largest chains has been spectacular (Ta-
bles 3 and 4~. In 1973, the three largest chains
owned only 2.2 percent of the beds. By 1980,
the three largest chains controlled 6.4 percent
of the beds nationwide, and by 1982, Beverly,
ARA, ancl Hillhaven owned, leased, or man-
aged 9.6 percent of all nursing home beds, a
2-year increase of 54 percent.
This picture of increased concentration,
however, is somewhat misleading. The three
largest chains have substantially increased their
holdings largely through acquisition of small-
to-medium chains, rather than through the
purchase of individual facilities. Thus, this in-
creased concentration does not represent a
substantial increase in the control of total beds
by the chains. It simply reflects the very larg-
est chains' purchase of or merger with other
large-to-medium multifacility systems. De-
spite the major increases in holdings by firms
such as Beverly, the industry remains fairly
fragmented, largely controlled by individual
owners and small (5- to 20-facility) local and
regional chains. Further, the rate of growth of
the largest chains could be somewhat slowed
as the number of medium-sized chains that can
be efficiently acquired diminishes.9
Despite misperceptions about current lev-
els of concentration, policymakers should fo-
cus attention on the industry's changing
structure. Although the chains do not control
an enormous proportion of nursing homes na
OCR for page 502
502
FOR-PROFIT ENTERPRISE IN HEALTH CARE
TABLE 3 Nursing Home System Ownership, 1972
Name of Chain
Number of Number of
Facilities Beds
79
77
70
60
56
47
44
44
43
41
41
38
36
30
29
28
27
26
23
20
20
20
National Health Enterprises
Unicare
First Healthcare Corporationa
Hillhavena
Leisure Lodgesb
Beverly Enterpnsesb
CENCO
American Medical International
National Living CentersC
Extendicare~
GeriatricsC
Americanae
Monterey Life Systems
Continental Care Centers
Medicentersa
Care Management
Anta/Four Seasons
Medic-Homes f
National Health Services
American Medical AlEliates
Aid, Inc.
Care Corp.
10,551
6,481
8,425
5,861
5,264
5,670
4,409
3,582
4,400
5,045
4,394
3,440
3,598
3,286
5,101
1,690
4,200
3,105
2,590
1,979
2,494
2,494
aFirst Healthcare facilities were acquired by CNA and later sold to Hillhaven;
Hillhaven also acquired Medicenters (1977).
bIn 1976, Stephens Inc. became the sole owner of Leisure Lodges, and in
1977, through a complex series of exchanges, Stephens Inc. and Beverly facilities
were merged.
CARA owns both National Living Centers (1973) and Geriatrics (1974).
~Extendicare changed its name to Humana and sold its nursing homes to
National Health Enterprises (1973).
Americana was acquired by CENCO (1972-1973).
fMedic-Home was involved in violations of Securities and Exchange Commis-
sion regulations and was eventually split. Two of the main components of this
chain were PMG and Liberty [Nursing Homes.
tionwicle, chains have achieved very signifi-
cant market penetration in some areas of the
country. In some regions of the country, the
four largest nursing home operators already
control between 60 and 100 percent of bed
capacity. In Texas, for example, Beverly and
ADA alone control nearly 25 percent of the
beds, dominating many geographic areas of
the state. The U. S. Department of Justice has
been concerned about some ofthe merger and
acquisition activity of the major chains. In Jan-
uary 1984, for example, it filed suit to block
Beverly's plan to acquire Southern Medical
Services, arguing that this acquisition would
"substantially lessen" competition in four ma-
jor markets in which Beverly would control
between 29 and 48 percent ofthe total licensed
nursing home bed capacity. Further, the ma-
jor chains' predictions about their growth and
increased concentration may well be accurate.
The concerns many observers feel about such
concentration is not only that it lessens com-
petition but that it also substantially reduces
the ability of the regulatory agencies to control
the behavior of We highly concentrated pro-
viders.
Several factors have contributed to the con-
centration of nursing home ownership. First,
OCR for page 532
532
homes to develop and implement quality mon-
itoring and assurance programs.
Third, there are significant structural dif-
ferences between hospitals and nursing homes.
Hospitals are still largely not-for-profit insti-
tutions and are presumed to operate under a
set of professional and ethical norms that con-
strain their behavior to the benefit of patients.
Nursing homes, however, are largely proprie-
tary. As businesses, they must calculate the
scope and quality of the services they provide
with an eye constantly turned toward profit-
ability goals.
Fourth, state and federal policies designed
to contain long-term care costs may contain
powerful incentives inimical to the provision
of high quality care. These are primarily cost
containment measures adopted in the last few
years, such as prospective payment systems,
reimbursement ceilings, and moratoria on new
nursing home bed construction. For nursing
homes with sizable populations of patients
supported by Medicaid, such reimbursement
policies contain incentives that tend to inhibit
admission of those most in need of care and
that may encourage reductions in staffing and
food. Under prospective reimbursement sys-
tems that have been instituted in a number of
states, payment rates are set in advance and
homes are allowed to retain the difference be-
tween the rate and what they actually spend.
Operating at the same level of quality but more
efficiently is clearly the most socially desirable
way of achieving profits in such a system; how-
ever, shifting to a less-costly-to-care-for pa-
tient mix is another way for facilities to achieve
profits under such a system.43 Reducing the
scope and quality of services is a third way for
homes to achieve profits. Reducing variable
expenditures such as staffing, activities, and
food is the simplest way for homes to hold
their expenditures below prospective rates.
Thus, discrimination and reductions in the level
and quality of services are two ways in which
homes may respond to these cost containment
initiatives. The evidence on discrimination is
clear, and there is some evidence that many
nursing homes, the proprietaries in particular,
may be reducing quality in response to severe
reimbursement constraints (Schlenker, 1984;
Birnbaum et al., 1979, 1981; Caswell and
Cleverley, 1978; Holahan, 1984~.
FOR-PROFIT ENTERPRISE IN HEALTH CARE
Finally, restrictive health planning and more
stringent reimbursement policies have re-
sulted in slowed construction of new nursing
homes. In addition, there are few community-
based services that can substitute for nursing
home care. Because demand for longterm care
exceeds supply, homes have little incentive to
compete for Medicaid patients by offering
higher quality. The only competition along
quality lines occurs among homes that seek to
maintain a high percentage of the more prof-
itable private-paying patients. Thus, compe-
tition among providers is an unreliable
mechanism for assuring quality in nursing
homes.
Given changes in the structure of hospital
ownership and in payment mechanisms, some
of the apparent differences between the hos-
pital and nursing home sectors may diminish.
The emergence of a strong proprietary sector
and of hospital chains that are growing verti-
cally and horizontally represents a striking
similarity to developments in the nursing home
industry. Further, increasing concern with es-
calating hospital costs and the development of
Medicare's prospective payment system are
very similar to prior developments in the long-
term care sector. This convergence of an
emerging proprietary sector and tightened
reimbursement policies could produce some
of the negative consequences associated with
the long-term care sector.
To a large extent, three factors are likely to
determine the ultimate outcome of such de-
velopments: (1) the response of health profes-
sionals to a changing environment; (2) the
response of patients and their willingness and
ability to become more effective consumers;
and (3) the ability of regulatory and peer re-
view agencies to exert a strong influence for
quality assurance. At the least, such devel-
opments suggest the need for more sophisti-
cated and substantial quality assurance activities
by public and private agencies to monitor ac-
curately the effects on quality and access and
to ensure that unacceptable reductions in
quality and access do not occur.
-
NOTES
I Both Medicare- and Medicaid-eligible patients pay
for part of their nursing home care; these individuals
OCR for page 533
THE NURSING HOME INDUSTRY
must make copayments (Medicare) or devote nearly all
of their income for care before Medicaid pays for the
additional nursing home charges. In addition, private-
pay patients tend to pay somewhat higher rates than
Medicare and Medicaid patients. These two factors ex-
plain why half the dollars but a larger proportion of the
patients are accounted for under government plans.
2This phrase is so apt that I've stolen it directly from
Vladeck (1980~.
3Indeed, these homes for the aged, dominated by
immigrant and religious groups, are the forebears of
the large, voluntary homes of today.
4Even in the 1930s, there was widespread concern
and dissatisfaction with conditions in many proprietary
nursing homes. The facilities were often aged and di-
lapidated houses, farms, or small motels that had been
converted to use as a nursing home. Nursing and med-
ical care were minimal at best, and reports of patient
abuse were widespread. These prompted calls for re-
form-for state licensing and inspection. But the di-
lemma that still plagues the regulatory system arose
then with a shortage of facilities, the imposition of
stricter standards would mean closing some, perhaps
many, facilities, aggravating the bed shortage. Like
modern regulatory officials, most states chose educa-
tion and exhortation in an attempt to improve the fa-
cilities rather than development and enforcement of
stricter standards of care (Vladeck, 1980; McClure, 1968;
Thomas, 1969~.
sOne of the major forces contributing to the grown
of nursing homes is the dramatic increase in the num-
ber and proportion of the population that is aged. The
proportion of the U. S. population 65 years of age and
older has increased from 4.4 percent in 1900 to 11.7
percent in 1983. Moreover, the projections are that by
the end of the century, between 35 million and 37
million people, at least 13.1 percent of the population,
will be aged. Moreover, the fastest growing cohort of
the population is the very old- those most at risk in
terms of needing long-term care services (Manton, 1984;
Torrey, 1984; U.S. Bureau of the Census, 1983~. Only
with the availability of financial assistance, however, is
this need translated into demand for nursing home
care, since the majority of the aged who actually need
long-term care cannot afford to pay for the care they
require.
regrowth in bed supply has leveled off for a variety
of reasons since the mid-1970s.
7For 1984, only 49 publicly held nursing home chains
are listed with the SEC. An additional number of mul-
tifacility nursing home chains are owned and operated
as subsidiaries of hospital chains.
BThere are basically two types of nursing home res-
idents-the "short-stay" patients whose average length
of stay is less than 3 months, and the "long-stay" res-
idents whose average LOS is more than 2.5 years (Liu
and Mossey, 1980). While the short-stay residents con
533
stitute a sizeable proportion of admissions, on any given
day the "long-stayers" are the majority of nursing home
patients.
fin addition, ongoing debate and ships in policy about
whether public programs will reimburse higher capital
or property costs that result from sales/purchases of
nursing homes is also likely to affect the rate of chain
growth.
inactive imposition of the LSC was delayed for sev-
eral years in order to give facilities ample opportunity
to come into compliance with what is fundamentally a
federal fire safety code.
CHEW was renamed the U. S. Department of Health
and Human Services (HHS) in 1981.
Enduring the early years of a mortgage, most of the
payment is for interest on the loan; relatively little is
applied to the principal. Depreciation payments by the
state, however, are usually calculated on a 20- to 30-
year life expectancy for a new nursing home and made
on a straight-line basis. Thus, under most of the 1970s'
cost-related systems, in the early years of a mortgage,
the depreciation payment from the state to the facility
exceeds the amount the facility actually has to pay the
mortgage holder as the principal payment. (Interest is
a direct pass-through.) The result is a positive cash flow
to the facility during those years and an incentive to
sell the facility as a depreciation payment from the state
approaches the amount of the mortgage that is payment
toward the principal (see Baldwin, 1980~. Many states
found nursing homes responding to this incentive, with
proprietary facilities being sold as often as every three
to four years, providing indirect profits to the facilities
and increased costs (but not services) to the states (Ohio
Nursing Home Commission, 1979; Washington Sen-
ate, 1978~. This made many individual owners willing,
even eager, to sell. Often owners would sell the facility
to a chain and then lease it back to operate (see also
Shulman and Galanter, 19769. For instance, in 1983,
Beverly, the largest chain, leased more than half its
facilities, and this is fairly common (Beverly Enter-
prises, lOK report filed with the SEC, 1983~.
Cone of the prevailing myths about long-terTn care
is that the elderly are in nursing homes because their
families have abandoned them. This is simply untrue-
unless dying is viewed as abandonment. Long-term
care is predominantly an issue involving widowed or
single elderly women. Half of all nursing home resi-
dents have no immediate relatives living in close prox-
imity. Those patients who do have relatives tend to be
very functionally dependent (in terms of needing as-
sistance in the activities of daily living, such as dressing,
eating, walking, and toileting) and also mentally im-
paired (Barney, 1974; Liu and Mossey, 1980~.
24 For example, Beverly Enterprises' operation of 13
percent ofthe facilities in Texas (a low-rate, prospective
reimbursement state) has average net revenues per
patient day that are 2 percent lower than the average
OCR for page 534
534
for all Texas facilities but net income that is 22 percent
higher.
75Some observers, such as Scanlon and Feder (1980)
cite "inadequacy" of return as a potentially more im-
portant cause of declining growth. Data on the prof-
itability of nursing homes, particularly the "chains" call
this into question (U.S. Senate Special Committee on
Aging, 1984~.
26Many reimbursement systems exclude nonprofit
owners from return on equity a "profit" factor. Thus,
nonprofit providers may receive less from Medicaid
(and Medicare) programs than for-profit entities with
comparable costs.
27The Tax Equity and Financial Responsibility Act
of 1982 (TEFRA) eliminated some of the future benefits
of ERTA.
28 For instance, CENCO, one of the larger chains in
1979-1980, was the target of a major Wall Street battle
and was eventually acquired by Manor Care. National
Health Enterprises, the sixth largest nursing home chain
in 1981 and Flagg Industries (number 20) were ac-
quired by Hillhaven/National Medical Enterprises.
Mediplex (number 8), Commercial Management (num-
ber 11), and Beacon Hill (number 21) have been ac-
quired by or merged with Beverly Enterprises, which
also acquired other small-to-medium size chains (e.g.,
P&H Enterprises, Inc.; Consolidated Liberty; PMG,
Inc.~.
29Demand is a function of need and ability and will-
ingness to pay.
20Two-thirds of all middle-income patients in nursing
homes spend their life savings within 2 years of ad-
mission and become Medicaid patients (U.S. Senate
Special Committee on Aging, 1984~.
22 It is well to note, as Vladeck (1980) does, that these
institutions do labor under some incentives that are
similar to those of the for-profits. 'tithe voluntaries may
not be profit-maximizers, but they invariably operate
under the constraint of trying at least to break even"
(Vladeck, 19801. They may, however, select different
methods than the for-profits to break even.
22 Two such chains report (in their filings with the
SEC) that the decision to expend funds upgrading newly
purchased facilities is part of a corporate strategy aimed
at attracting more private-pay and Medicare patients-
who are more lucrative for the nursing home.
23Again, this may vary by chain. In addition, the
record of Beverly Enterprises in Texas indicates that
it has a disproportionate number of significant viola-
tions. Indeed, there is some evidence that Beverly does
not promptly correct deficiencies when cited, since it
has received a disproportionate share of punitive ac-
tions for failure to correct violations.
24Schlenker (1984), in reviewing studies on the re-
lationship between costs, reimbursement policies and
quality of care, argues that RN hours and dietary costs
may be good indicators of quality. "A more intense
FOR-PROFIT ENTERPRISE IN HEALTH CARE
case mix and/or higher quality care should require some
combination of more nursing hours per patient day, a
greater ratio . . . RN or . . . LPN hours to aide hours,
and possibly higher wage rates to reflect higher skill
levels.... (Higher dietary costs may also be related)
since nutritional adequacy is important to patients' overall
health."
Awhile the high-quality homes outspent the low-
quality homes on these items, the low-quality facilities
had higher expenditures on administrator salaries, legal
and accounting fees, and motor vehicles; they also seem
to substitute LPNs for RNs.
26Nonprofits tended to have more beds, more build-
ings, and more floors in the building; they also tended
to have more single rooms, more ward rooms (with five
or more patients per room), and more bathrooms.
27An alternative explanation is that these facilities
offer such low quality oicare that they can attract only
those individuals with no other choices, such as the
elderly poor and disabled without family or other social
supports (see Greene and Monahan, 1981; Ohio Nurs-
ing Home Commission, 1979~.
28The FotUer et al. (1981) study used multiple
regression analysis to study the relationship between
profits per patient day (ppd) and four measures of qual-
ity: (1) skilled nursing hours ppd.; (2) nonnursing hours
ppd.; (3) total nursing and nonnursing hours ppd. and
(4) staffing ratios. They argue that these are usefill sur-
rogates for the quality of patient care and found that
"profitability increases as the service intensity (quantity
and quality of labor inputs) decreases." The study fo-
cused on 43 nursing homes in California.
29The commission also reported a strong correlation
between the level of profitability and lower expendi-
tures on food, dietary salaries, medical supplies, nurse's
aides, medical and rehabilitative care, electricity, and
housekeeping.
30Elwell notes that although some of the spending
differences do not appear large, the figures represent
per patient per day expenditures. He observes that
reductions in such spending, even relatively small ones,
can result in substantial savings for the facility. For
instance, "by spending 35¢ less ppd for nursing, the
average SNF (which in New York had 44,867 inpatient
days in 1976) could save over $15,700 per year" (Elwell,
1984~.
3~Of those 45 facilities, 37 were earning profits on
the Medicaid rate alone.
32Koetting also concluded that proprietary homes were
more efficient that is, they were able to attain a given
level of quality at a lower cost than the nonprofit fa-
cilides. In addition, he found that cost and quality of
care were only wealdy related (Koetting, 1980~.
33The performance of Beverly Enterprises, one of
the major chains operating facilities in California, was
particularly poor. According to an analysis of the Cal-
ifornia Health Facilities Commission data by the AFL
OCR for page 535
THE NURSING HOME INDUSTRY
CIO (1983a), "Beverly's . . . performance was abysmal.
For 35 homes listed as belonging to Beverly, the av-
erage number of citations (per facility) came to 2.31,
with 9 of the 35 exceeding the California standards .
to rank among the worst homes in the state."
34The department does not maintain a listing by type
of owner; therefore, the listing of facilities receiving
some form of punitive action has to be matched against
a separate ownership file. The control (ownership) type
of four facilities terminated from the program could not
be determined from these files.
35The study, however, did not find a relationship
between staff ratios (resource inputs) and other quality
of care measures. "The correlations are found all uni-
formly insignificant" (Lee, 1984~.
36In Ohio, the multistate chains were Manor Care,
Hillhaven, HCF (now Health Care and Retirement
Fund, Inc.), Medicenters, and Americare. The data
are derived from cost reports submitted to the Ohio
Department of Public Welfare by 579 (77 percent) of
the nursing homes participating in the Ohio Medicaid
program in 1977. Eighty-five percent were for-profit
facilities. Of these, 78 percent were operated by in-
dividual owners; 16 percent were owned by small, in-
trastate chains; and 8.5 percent (32 facilities) were part
of large multistate nursing home chains.
37This seems to be borne out by anecdotal testimony
and evidence presented to and gathered by the Ohio
Nursing Home Commission. The major stockholder of
the largest intrastate chain was indicted for Medicaid
fraud and was the subject of several health department
compliance actions. Two other intrastate chains had an
unchallenged reputation for providing truly vile care.
38Management fees are significantly positively cor-
related with increased spending on other administra-
tive salaries; office supplies and printing; communication;
travel and other motor vehicle; advertising and public
relations; legal and accounting fees; and other admin-
istrative . . . services" (Ohio Nursing Home Commis-
sion, 1979~.
39 Such studies should also take into account the va-
riety of services that are provided under the daily rate
and are incorporated in costs, as well as noting those
services for which additional charges are billed to pa-
tients.
40 Since Medicare pays for only about 2 percent of
all expenditures on nursing home care, problems Med-
icare beneficiaries experience have not been as well-
documented; moreover, they may be a result of the
unwillingness of many homes to meet the higher cer-
tification and audit standards associated with Medicare
rather than a result of the payment rate or disability
of patients.
4~". . . two-thirds of all middle income patients in
nursing homes spend their life savings within 2 years
of admission and become Medicaid patients" (U. S. Sen-
ate Special Committee on Aging, 1984~.
535
42The data are far from precise, but the average Med-
icaid utilization nationwide appears to be between 64
and 70 percent. In some states, of course, it is much
higher, as in North Carolina where 89 percent of the
patients receive assistance from Medicaid.
43One of the most common myths is that quality is
low because profits are low or nonexistent. Research
does not support this myth (Ohio Nursing Home Com-
mission, 1979~. Most for-profit homes earn healthy re-
turns. It is the incentives inherent in reimbursment
systems that seem to affect quality, not merely the rate,
although clearly reimbursement rates must be suffi-
cient to cover genuine, reasonable costs if quality of
care is to be achieved (Schlenker, 1984~.
REFERENCES AND BIBLIOGRAPHY
AFL-CIO, Executive Council (1977) Nursing Homes
and the Nation's Elderly: AnKrica's Nursing Homes
Prof t in Human Misery. Bad Harbour, Fla.: Statement
and report adopted by the AFL-C10.
AFL-CIO, Service Employees International Union
(1983a) Beverly Enterprises in Michigan: A Case Study
of Corporate Takeover of Health Care Resources.
Washington, D.C.: The Food and Beverage Trades
Department.
AFL-CIO, Service Employees International Union
(1983b). Beverly Enterprises Patient Care Record;
Washington, D.C.: The Food and Beverage Trades
Department, OFFICIO, January 27.
Aging Health Policy Center (1983) Unpublished
Telephone Survey of States, Nursing Home Supply
Data. San Francisco: lhe University of California.
American Association of Homes for the Aging (1981)
Factors Influencing the Provision of Non-institutional
Long-Term Care by Homes for the Aging. (Contract
18-p-976-24/3-01) Washington, D.C.: Health Care Fi-
nancing Administration.
Arrow, K. I. (1979) The limitations of the profit mo-
tive. Challenge ~(Sept./Oct.):23-37.
Baldwin, C. Y. (1980) Nursing home finance: Capital
incentives under Medicaid. Discussion paper, Bran-
deis University Health Policy Consortium, Waltham,
Massachusetts.
Baldwin, C. Y., and C. E. Bishop (1983) Return to
nursing home investment: Issues for public policy. A
paper prepared at the Brandeis University Health Pol-
icy Consortium, Waltham, Massachusetts.
Barney, J. (1974) Community presence as a key to
quality of care in nursing homes. American Joumal of
Public Health 64~3~:2~268.
Beattie, W. M., and J. Bullock (1964) Evaluating
services and personnel in facilities for the aged. In M.
Leeds and H. Shore, eds., GeriatricInstitutional Man-
agement. New York: Putnam.
Beverly Enterprises (1980) 10K Report to the Se-
curities and Exchange Commission, Washington, D.C.
OCR for page 536
536
Birnbaum, H., C. Bishop, G. Jensen, A. J. Lee, and
D. Wilson (1979) Reimbursement Strategies for Nurs-
ing Home Care: Developmental Cost Studies. Cam-
bridge, Mass.: Abt Associates. (DHEW Contract No.
600-77-0068).
Birnbaum, H., C. Bishop, A. J. Lee, and G. Jensen
(1981) Why do nursing home costs vary? The deter-
minants of pursing home costs. Medical Care 19~11~:109~-
1107.
Birney, J. M. (1981) The Growing Market in Long
Term Care and Retirement Living. New York: Furman,
Selz, Lager, Dietz, and Birney.
Bisenius, M. F. (1984) Quality of Health Care in
Iowa Nursing Homes; Results from the ICE Outcome
Oriented Survey, Decoders, 1982-Nov~rriber30, 1983.
Des Moines: Iowa State Department of Health, Di-
vision of Health Facilities.
Bishop, C. (1980) Nursing home behavior under cost-
related reimbursement. Discussion paper (DP-9, re-
vised), Brandeis University, University Health Policy
Consortium, Waltham, Massachusetts.
Blyskal, J. (1981) Gray gold. Forbes, Nov. 23, pp.
80-81.
Brody, E. M. (1977) Environmental factors in de-
pendency. In A. N. Exton-Smith and J. G. Evans, eds.
Care of the Elderly: Meeting the Challenge of Depen-
dency. New York: Grune and Stratton.
Brooks, C. H., and J. A. HolEnan (1978) Type of
ownership and Medicaid use of nursing~are beds.
Journal of Community Health 3~3~:236-244.
Butler, R. N. (1976) We should end commerciali-
zation in the care of older people in the U.S.: Some
thoughts. International Journal of Aging and Human
Development 7:87-90.
California Commission on State Government Orga-
nization and Economy (1983) The Bureaucracy of Care:
Continuing Policy Issues for Nursing Home Services
and Regulation. Sacramento.
California Health Facilities Commission (1982) Eco-
nomic criteria for health planning, FY 1981-1982tl982-
1983. In Long Term Care Facility Effectiveness Stan-
dard~. Sacramento.
Care Enterprises (1984) lOK Report to the Securities
and Exchange Commission, Washington, D.C.
Caswell, J., and W. Cleverley (1978) Final Report:
CostAnalysis of Ohio Nursing Homes. Columbus: Ohio
Department of Health.
Caswell, R. J., and W. Cleverley (1983) Cost analysis
of the Ohio nursing home industry. Health Services
Research 18(Fall):359-382.
Cohen, J. (1983) Public Programs Financing Long
Term Care. Washington, D.C.: National Governors
Association.
Cotterill, P. G. (1983) Provider incentives under al-
ternative reimbursement systems. In R. J. Vogel and
H. C. Palmer, eds. Long-Term Care: Perspectivesfrom
FOR-PROFIT ENTERPRISE IN [IEALTH CARE
Research and Demonstrations. Washington, D.C.:
Health Care Financing Administration.
Covaleski, M. A., and C. J. Davis (1981) Capital
maintenance and equity erosion in the nursing home
industry: A study in one state. The Journal of Long-
Term Care Administration (Fall):11-24.
Cyr, A. B. (1983) Proxy case mix measures for nurs-
ing homes. Inquiry 20(Winter):350-360.
Doty, P., K. Liu, and J. Weiner (1985) An overview
of long-term care. Healthcare Financing Review 6~3~:69-
78.
Dunlop, B. (1979) The Growth of Nursing Home
Care. Lexington, Mass.: Lexington Books.
Elliott, J. R., Jr. (1969) No tired blood: Nursing home
operators are long on enthusiasm, short on experience.
Barron's, March 24.
Elwell, F. (1984) The effects of ownership on insti-
tutional services. Unpublished paper, Department of
Sociology and Anthropology, Murray State University,
Murray, Kentucky.
Etzioni, A., and P. Doty (1976) Profit in not-for-
profit corporations: The example of health care. Polit-
ical Science Quarterly 91(Fall):433~53.
Fackelmann, K. (1985) Manor Care chain's large profits
a result of wooing wealthy patients. Modern Healthcare
15(February): 14~148.
Feder, J., and W. Scanlon (1980) Regulating the
nursing home bed supply. Milbank Memorial Fund
Quarterly Health and Society 58January) 54-58.
Feder, J., and W. Scanlon (1981) Medicare and Med-
icaid Patients' Access to Skilled Nursing Facilities. A
background report to the Health Care Financing Ad-
ministration. Washington, D.C.: The Urban Institute.
November.
Feder, J., and W. Scanlon (1982) The underused
benefit: Medicare's coverage of nursing home care.
Milbank Memorial Fund QuarterlylHealth and Society
70:1152-1161.
Fottler, M. D., H. L. Smith, and W. L. James (1981)
Profits and patient care quality in nursing homes: Are
they compatible? The Gerontologist 21~5~:532-538.
Fraundorf, K. (1977) Competition and public policy
in the nursing home industry. Journal of Econom*
issues ll(September):601-634.
GAO (U. S. General Accounting Once) (1979) Prob-
lems in Auditing Medicaid Nursing Home Chains.
Washington, D.C.: U. S. Government Printing Office.
GAO (1982) Preliminary Findings on Patient Char-
acteristics and State Medicaid Expenditures for Nurs-
ing Home Care. Washington, D.C.: U. S. Government
Printing Office.
GAO (1983a) Hospital Merger Increased Medicare
and Medicaid Payments for Capital Costs. Washing-
ton, D. C.: U. S. Government Printing Office.
GAO (1983b) Medicaid and Nursing Home Care: Cost
Increases and the Needfor ServicesAre Creating Prob
OCR for page 537
THE NURSING HOME INDUSTRY
lems for the States and the Elderly. Washington, D.C.:
U. S. Government Printing Office.
Gettlin, R. (1984) Medicare, Medicaid to pay hos-
pitals $218 million. Durham Morning Herald, March
21, p. 5B.
Gibson, R. M. (1979) National health expenditures,
1978. Health Care Financing Review 1-36.
Gottesman, L. E. (1974) Nursing home performance
as related to resident traits, ownership, size, and source
of payment. American Journal of Public Health 64:269-
276.
Greene, V. L., and D. Monahan (1981) Structure
and operational factors affecting quality of patient care
in nursing homes. Public Policy 29:399415.
Greenless, l. S., Marshall, J. M., and Yett, D. E.
(1982) Nursing home admissions policies under reim-
bursement. The BellJourrm1 of Economies 13(Spring):93-
106.
Greenwald, S., and M. W. Lin (1971) Intercorre-
lations of data on nursing homes. The Gerontologist
11:337-340.
Grimaldi, P. L. (1982) Medicaid Reimbursement of
Nursing Home Care. Washington, D. C.: American En-
terprise Institute for Public Policy Research.
Harel, Z. (1981) Quality of care, congruence and
well-being among institutionalized aged. The Geron-
tolog~st 21~:523-531.
Barrington, C. (1984) Public policy and the nursing
home industry. International Journal of Health Ser-
vices 14~3~:481490.
Harringon, C., and L. Grant (1985) Nursing Home
Bed Supply, Access and Quality of Care. San Fran-
cisco: University of California at San Francisco, Aging
Health Policy Center.
EIarrington, C., and J. H. Swan (1984) Institutional
long-term care services. In C. Harrington, R. J. New-
comer, and C. L. Estes, eds. Long-Term Care of the
Elderly: Public Policy Issues.
Harrington, C., R. J. Newcomer, and C. L. Estes
(1984) Long-Term Care for the Elderly: Public Policy
Issues. Beverly Hills, Calif.: Sage Publications.
Harris, M. (1981) American Now: The Anthropology
of a Changing Culture. New York: Simon and Schus-
ter.
Hawes, C. (1976) Ownership and profits in the nurs-
ing home industry. Draft memo to Val Halamandaris,
U.S. Senate Subcommittee on Long-Telll~ Care.
Hawes, C. (1978) Vertical and horizontal concen-
tratron of ownership and interlocking relationships
among the major nursing home chains. Memo and pre-
sentation to the Inspector-General, Department of
Health, Education, and Welfare.
Hawes, C. (1983) Quality assurance in long-term care:
Major problems and issues. A briefing paper prepared
for the National Academy of Sciences Institute of Med-
icine Committee on Nursing Home Regulation (No-
vember).
537
Himmelstein, D. U., A. A. Jones, and S. Woolhand-
ler (1983) Hypernatremic dehydration in nursing home
patients: An indicator of neglect. Journal of the Amer-
ican Geriatrics Society (August).
Holahan, J. (1984) Nursing Home Care Under Al-
ternative Patient-Related Reimbursement Systems.
Washington, D.C.: The Urban Institute (September).
Holmberg, R. H., and N. A. Anderson (1968) Im-
plications of ownership for nursing home care. Medical
Care 6:300-307.
Illinois Legislative Investigating Commission (1983)
Regulation and Funding of Illinois Nursing Homes.
Springfield: Illinois Legislature.
Institute of Medicine (1981) Health Care in a Context
of Civil Rights. Washington, D.C.: National Academy
Press.
Jazwiecki, T. (1984) Medicaid systems for long-term
care facility services. Healthcare Financial Manage-
ment (April).
Jensen, G. (1979) Nursing home costs in Indiana. In
Birnbaum et al. (1979), -t.v.
Johnson, D. E. (1984) Survey plots 475 chains' grown.
Modern Healthcare (May 15~:65-84.
Kahn, K. A., W. Hines, A. S. Woodson, and G.
Burld~am-Armstrong (1977) A multidisciplinary ap-
proach to assessing the quality of long-term care facil-
ities. The Gerontologist 17:61-65.
Kane, R. L. (1983) Predicting the outcomes of nurs-
ing home patients. The Gerontologist 23~2~:200-206.
Kane, R. L., R. M. Bell, S. D. Hosek, S. Z. Riegler,
and R. A. Kane (1983) Outcome-based reimbursement
for nursing home care. A paper prepared for the Na-
tional Center for Health Services Research. Santa Mon-
ica, Calif.: The Rand Corporation (December).
Kane, R. R. Kane, D. Keffel, R. Brook, C. Eby,
G. Goldberg, L. Rubenstein, and J. Van Ryzin (1979)
The PSRO and the Nursing Home. Vol I, An Assessment
of PSRO Long-Term Care Review. Report submitted
to Health Care Financing Administration (DHEW
Contract no. 500-78-0040~.
Kart, C., and B. Manard (1976) Quality of care in
old age institutions. The Gerontologist 16:250-256.
Kastenbaum, R. J., and S. E. Candy (1973) The 4%
fallacy: A methodological and empirical critique of ex-
tended care facility population statistics. Journal of Ag-
ing and Human Development 4(Winter):15-22.
Koetting, M. (1980) Nursing Home Organization and
Efficiency. Lexington, Mass.: Lexington Books.
Kosberg, J. (1973) Differences in proprietary insti-
tutions caring for affluent and non-aDluent elderly. The
Gerontologist 13:229-304.
Kosberg, J., and S. Tobin (1972) Variability among
nursing homes. The Gerontologist 12:214-219.
Kuntz, E. F. (1981a) coursing home chains buy up
smaller groups. Modern Healthcare (June):68-72.
Kuntz, E. F. (1981b) Retirement apartments prom
OCR for page 538
538
ise big business for nursing home chains. Modern
Healthcare June):72-74.
Kuntz, E. F. (1982) Systems scoop up nursing homes.
Modern Healthcare (May):102-104.
Kuntz, E. F. (1983) Firms converge on home care
market. Modern Healthcare (May):142-143.
Kuntz, E. F. (1984) For-profits adding home health-
care to aid bottom lines. Modern Healthcare (May 159.
Kurowski, B., and L. Breed (1981) A Synthesis of
Research on Client Needs Assessment and Quality As-
surance Programs in Long-Tenn Care. Denver: Uni-
versity of Colorado Health Services Research Center.
Lane, L. F. (1979) Private insurance for Long-Term
Care: Availability Problems and Actions. Washington,
D.C.: American Health Care Association.
Lane, L. F. (1981) The nursing home: Weighing
investment decisions. Healthcare Financial Manage-
ment (May):30-45.
Lane, L. F. (1984) Developments in facility-based
services. Paper prepared for the Institute of Medicine,
National Academy of Sciences, Washington, D.C.
Lasch, C. (1979) The Culture of Narcissism. New
York: Warner Books.
LaViolette, S. (1982) Nonprofits setting up for-profit
divisions; may even sell stock. Modern Healthcare
(May):98-100.
LaViolette, S. (1983) Nursing home chains scramble
for more private paying patients. Modern Healthcare
(May):130-138.
LeConey, M. (1979) Institutional Report: Nursing
Home Industry Review. New York: Merrill, Lynch,
Pierce, Fenner and Smith, Inc.
Lee, A. J., and H. Birnbaum (1983) The determi-
nants of nursing home operating costs in New York
State. Health Services Research 1842~:285-308.
Lee, A. J., H. Birnbaum, and C. Bishop (1983) How
nursing homes behave: A multi-equation model of
nursing home behavior. Social Science and Medicine
17~23~:1897-1906.
Lee, Y. S. (1984) Nursing homes and quality of health
care: The first year of result of an outcome-oriented
survey. Journal of Health and Human Resource Ad-
ministration 7~1~:32-60.
Levey, S., H. S. Rucklin, B. A. Stotsky, D. R. Kin-
loch, and W. Oppenheim (1973) An appraisal of nursing
home care. Journal of Gerontology 28:299-228.
Levinson, R. (1984) Impact of Proprietary Chain
Ownership in the Nursing Home Industry on Quality
Access and the Cost of Care. April 25 draft of a report
to the U.S. House Subcommittee on Oversight and
Investigations.
Levit, K. R., H. I~7enby, D. R. Walso, and L. M.
Davidoff (1985) National health expenditures, 1984.
Health Care Financing Review 7(Fall):1-35.
Lewin, L. S., P. A. Derzon, and R. Margulies (1981)
Investor-owned and non-profits differ in economic per-
formance. Hospitals 55(13~:52-58.
FOR-PROFIT ENTERPRISE IN HEALTH CARE
Linn, M. W., L. Gurel, and B. S. Linn (1977) Patient
outcome as a measure of quality of nursing home care.
American Journal of Public Health (April):337-344.
Liu, K., and J. Mossey (1980) The role of payment
source in differentiating nursing home residents, ser-
vices, and payments. Health Care Financing Review
2(Summer):51-61.
Manard, B. B., C. S. Kirt, and D. van Oils (1975)
Old Age institutions. Lexington, Mass.: Lexington
Books.
Manor Care (1981) 10K Report to the Securities and
Exchange Commission, Washington, D.C.
Manton, K. (1984) Changing health status and need
for institutional and noninstitutional long-term care
services. Paper prepared for the Institute of Medicine
Committee on Nursing Home Regulation. Durham,
N.C.: Duke University, Center for Demographic Stud-
ies.
Markus, G. R. (1972) Nursing Homes and the Con-
gress: A Brief History of Developments and Issues.
Washington, D. C.: U. S. Library of Congress.
McClure, E. (1968) More Than a Roof: The Devel-
opment of Minnesota Poor Farms and Homes for the
Aged. St. Paul: Minnesota Historical Society.
Mech, A. B. (1980) Evaluating the process of nursing
care in long-term care facilities. Quality Review Bul-
letin 6(March):24-30.
Meiners, M. (1982) An econometric analysis of the
major determinants of nursing home costs in the United
States. Social Science and Medicine 16:887-898.
Mendelson, M. A. (1974) Tender Loving Greed. New
York: Alfred A. Knopf.
Mennemeyer, S. (1979) Long-term care costs in New
York State. Discussion paper number 455, State Uni-
versity of New York at Buffalo, Department of Eco-
nomics, New York.
Minnesota Senate and House, Select Committee on
Nursing Homes (1976) Final Report. St. Paul: Min-
nesota State Legislature.
Missoun State Senate, Health Care Committee (1978)
Nursing and Boarding Home Licensing in Missouri,
Jefferson City, Missouri.
Moden, M. (1982) Rate Setting-Texas Medicaid SNFI
ICE Program. Austin: Texas Department of Human
Resources, Office of Programs, Budget and Statistics.
Montgomery Securities (1983) The American Nurs-
ing Home Industry: Introduction to a Changing In-
dustry. An institutional report by W. R. Friedman, Jr.,
and A. Bergh, San Francisco, California.
Morton Research Company (1982) The Cost of Op-
erating Nursing Homes An In-dep~ Financial Anal-
ysis of the Nursing Home Industry. Merrick, N.Y.:
Morton Research Company.
Moss, F., and V. Halamandans (1978) Too Old, Too
Sick, Too Bad: Nursing [Iomes in America. Gerrnan-
town, Md.: Aspen Systems Corp.
New Jersey State Nursing Home Commission (1978)
OCR for page 539
THE NURSING HOME INDUSTRY
Report on Long-Term Care. Trenton, N.J.: New Jersey
State Nursing Home Commission.
New York State Moreland Act Commission (1975)
Reimbursing Operating Costs: Dollars Without Sense.
New York State Commission on Nursing Homes and
Residential Facilities.
New York Temporary State Commission on Living
Costs and He Economy (1975) Report on Nursing Homes
and Health Related Facilities in New York State. A1-
bany: New York Temporary Commission.
New York Times (March 29, 1983) U.S. sees family
help on Medicaid costs.
O'Brien, J., B. O. Saxberg, and H. L. Smith (1983)
For profit or not-for-profit nursing homes: Does it mat-
ter? The Gerontologist 23~4~:341-348.
Ohio Nursing Home Commission (1979) A Program
in Crisis: Blueprint for Action. Columbus: Ohio Gen-
eral Assembly.
Ouslander, J. G., R. L. Kane, and I. B. Abrass (1982)
Urinary incontinence in elderly nursing home patients.
Journal of the American Medical Association 248:1194.
Palmer, H. C., and R. J. Vogel (1983) Models of the
nursing home. In R. I. Vogel and H. C. Palmer, eds.
Long-term Care: Perspectives from Research and Dem-
onstrations. Washington, D.C.: Health Care Financ-
ing Administration.
Palmore, E. (1976) Total chance of institutionaliza-
tion among the aged. The Gerontologist 16:504-507.
Pechansky, R., and L. Taubenhaus (1976) Institu-
tional factors affecting quality of care in nursing homes.
Geriatrics 20:591-598.
Punch, L. (1982) For-profit nursing home systems
consolidate; beds grow by 18%. Modern Healthcare
June):7~77.
Punch, L. (1984) Chains expand their operations,
expecting prospective pay boon. Modern Healthcare
(May):131-140.
Punch, L. (1985) Investor-owned chains lead in-
crease in beds. Modern Healthcare June):12~136.
Rango, N. (1982) Nursing home care in the United
States: Prevailing conditions and policy implications.
The New EnglandJournal of Medicine 307~14~:883-889.
Ray, W. A., C. F. Federspeil, and W. Schaffner
(1980) A study of anti-psychotic drug use in nursing
homes: Epidemiological evidence suggesting misuse.
American Journal of Public Health 70:485~91.
Rice, D. (1984) The health care needs of the elderly.
In C. Harrington et al., eds. Long-Term Care for the
Elderly: Public Policy Issues. Beverly Hills, Calif.: Sage
Publications.
Riportella-Muller, R., and D. P. Slesinger (1982)
The relationship of ownership and size to quality of
care in Wisconsin nursing homes. The Gerontologist
22:429 434.
Ruchlin, H., and S. Levey (1972) Nursing home cost
analysis: a case study. Inquiry 9~3~:3-15.
539
Scanlon, W. (1980a) Nursing home utilization pat-
terns: Implications for policy. Journal of Health Poli-
tics, Policy and Law 4~4~:619^641.
Scanlon, W. (1980b) A theory of the nursing home
market. Inquiry 17~1~:2541.
Scanlon, W., and J. Feder (1984) The long-term care
marketplace: An overview. Healthcare Financial Man-
agement (lanuary).
Scanlon, W., and M. Sulvetta (1983) The supply of
institutional long-term care: Descriptive analysis of its
growth and current state. (Contract No. 100-80-0158~.
In Project to Analyze Existing Long-Tenn Care Data.
Final Report, Vol. 5. Washington, D.C.: Department
of Health and Human Services.
Schlenker, R. E. (1984) Nursing home reimburse-
ment, quality, and access a synthesis of research. Pa-
per prepared for the Institute of Medicine Conference
on Reimbursement, Anaheim, California.
Schlenker, R. E., and P. W. Shaughnessy (1984)
Case mix, quality, and cost relationships in Colorado
nursing homes. Health Care Financing Review.
Schlenker, R. E:., P. W. Shaughnessy, and I. Yslas
(1983) The effect of case mix and quality on cost dif-
ferences between hospital-based and freestanding
nursing homes. Inquiry 20(Winter):361~68.
Shaughnessy, P., E. Tynan, D. Landes, C. Huggs,
D. T. Holub, and L. Breed (1980) An Evaluation of
Swing-Bed ExperinKnts to Provide Long-Term Care in
Rural Hospitals, Volume 2, Final Technical Report.
Denver, Colorado: Center for Health Services Re-
search, University of Colorado Health Sciences Cen
ter.
Shulman, D., and R. Galanter (1976) Reorganizing
the nursing home industry: A proposal. Milbank Mem-
orial Fund QuarterlylHealth and Society (Spring):129-
143.
Silvers, J. B., and B. Spitz (1983) The nursing home:
Capital formation and funding. In Capital Management
in Healthcare Organizations. Healthcare Financial
Management Association.
Sims, W. B. (1984) Financing strategies for long-
term care facilities. Healthcare Financial Management
(March).
Sirrocco, A. (1983) An Overview of the 1980 National
Master Facility Inventory Survey of Nursing and Re-
lated Care Homes. Washington, D.C.: National Center
for Health Statistics.
Smith, H. L., and M. D. Fottler (1981) Cost and
cost containment in nursing homes. Health Services
Research 16~1~:17~1.
Spitz, B. (1976) Prospective reimbursement of nurs-
ing homes. A working paper. Washington, D.C.: The
Urban Institute.
Stassen, M., and C. Bishop (1983a) Nursing home
capacity in four states: Preliminary results. Draft report
prepared for the Brandeis University Health Policy
Consortium, Waltham, Massachusetts.
OCR for page 540
540
Stassen, M., and C. E. Bishop (1983b) Incorporating
Case Mix in Prospective Reimbursementfor SNF Under
Medicare: Critical Review of Relevant Research. Wal-
tham, Mass.: Brandeis University Center for Health
Policy Analysis and Research.
Stevens, R., and R. Stevens (1974) Welfare Medicine
in America: A Case Study. New York: The Free Press.
Texas Department of Human Resources (1984) "Peek
'83 A Preliminary Look at 1983 Cost Reports, File
NH 1983SE." A report prepared by the Office of Pro-
grams Budget, Rate Setting Operations. Austin, Texas.
Texas Nursing Home Task Force (1978) Report on
Texas Nursing Homes. A report to John L. Hill, At-
torney General. Austin, Texas.
Thomas, W. C., Jr. (1969) Nursing Homes and Public
Policy: Drift and Decision in New York State. Ithaca,
N.Y.: Cornell University Press.
Ting, H. (1984) New directions in nursing home and
home healthcare marketing. Draft manuscript. Na-
tional Medical Enterprises.
Torrey, B. B. (1984) The visible cost of the invisible
aged: The fiscal implications of the growth in the very
old. Paper presented at the American Association for
the Advancement of Science Annual Meeting in New
York City.
Trautman, W. B. (1984) Economic Concentration and
the Federal Tax Code. Santa Monica, Calif.: lbe Rand
Corporation (Rand Paper Series, P-6994~.
U.S. Bureau of the Census (1983) America in tran-
sition: An aging society. Current Population Reports.
Series P-23, No. 128. Washington, D.C.: U.S. Gov-
ernment Printing Office.
U. S. Congress, Senate Committee on Finance (1972)
The Social Security Amendments of 1972: Report to
Accompany H.R 1. 92nd Congress, 2nd Session, S.R
92-1230. Washington, D.C.: U.S. Government Print-
ing Office.
U.S. Congress, Senate Committee on Labor and
Public Welfare (1960) The Condition of AmericanNurs-
ing Homes. Washington, D. C.: U. S. Government
Printing Office.
U. S. DHEW (Department of Health, Education, and
Welfare) (1975a) Long-Temn Care Facility Improve-
ment Study, Introductory Report. Office of Nursing
Home Affairs. Washington, D.C.: U.S. Government
Printing Office.
U.S. DHEW (1975b) Selected Operating and Fi-
r~ancia1 Characteristics of Nursing Homes, United States:
1973-74 National Nursing Home Survey. Vital and
Health Statistics, Series 13, No. 12. DHEW Publica-
tion No. (HRA) 76-1773. Washington, D.C.: U.S. Gov-
ernment Printing Office.
U.S. DHEW (1978) Memo from the Audit Agency
on multi-state chains to Tom Morns, inspector-general,
HEW, Washington, D.C.
U. S. DHEW il979) The national nursing home sur
FOR-PROFIT ENTERTRISE IN HEALTH CARE
vey 1977 summary for the United States. Vital and
Health Statistics, Series 13, No. 43. Washington, D. C.:
U.S. Government Printing Office.
U. S. DHHS (Department of Health and Human Ser-
vices) (1981a) The Need for Long-Tenn Care. Wash-
ington, D.C.: ache Federal Council on Aging.
U.S. DHHS, Office of the Assistant Secretary for
Planning and Evaluation (1981b) Working Papers on
Long-Tenn Care Prepared for the 1980 Undersecre-
tary's Task Force on Long-Term Care. Washington,
D.C.: U.S. Department of Health and Human Ser-
vices.
U. S. National Center for Health Statistics (1979) The
national nursing survey 1977, summary for the United
States. Vital and Health Statistics, Senes 13, No. 43.
Washington, D. C.: U. S. Government Printing Office.
U.S. National Center for Health Statistics (1984)
Trends in nursing and related care homes and hospi-
tils. Vital and Health Statistics, Series 14, No. 30.
DHHS Pub. No. (PHS) 84-1825. Washington, D.C.:
U.S. Government Printing Office.
U. S. Senate, Committee on Finance (1970) Medicare
and Medicaid: Probl~rrLs, Issues and Alternatives. 91st
Congress, 2nd Session. Washington, D.C.: U.S. Gov-
ernment Printing Office.
U.S. Senate, Committee on Finance (1972) The So-
cial Security Act Amendments of 1972: Report to a
Company H. R. 1. 92nd Congress, 2nd Session. Wash-
ington, D.C.: U.S. Government Printing Office.
U.S. Senate, Committee on Labor and Public Wel-
fare (1960) The Condition of American Nursing Homes.
Washington, D.C.: U.S. Government Printing Office.
U.S. Senate, Special Committee on Aging (1984)
Discrimination Against the Poor and Disabled in Nurs-
ing Homes. Senate Heanng 98-1091. Washington, D.C.:
U.S. Government Printing Office.
U. S. Senate, Special Committee on Aging, Subcom-
mittee on Long-Term Care (1974) Nursing Home Care
in the United States: Failure in Public Policy. Wash-
ington, D.C.: U.S. Government Printing Office.
U. S. Senate, Special Committee on Aging, Subcom-
mittee on Long-Term Care (1975a) Doctors in nursing
homes: The shunned responsibility. Supporting paper
No. 3. Washington, D.C.: U.S. Government Printing
Office.
U. S. Senate, Special Committee on Aging, Subcom-
mittee on Long-Term Care (1975b) Nurses in nursing
homes: The heavy burden (the reliance on untrained
and unlicensed personnel). Supporting paper No. 4.
Washington, D. C.: U. S. Government Printing Office.
Valiante, J. (1984) Forecasting capital requirements:
Potential trends. Health Care Financial Management
(August):52-~9.
Van Gelder, L. (1975) Stein for phasing out prordt-
mal~ng nursing homes. New York Times, February 27,
p. 22.
,
OCR for page 541
THE NURSING HOME INDUSTRY
Virginia Joint Legislative Audit and Review Com-
mission aLARC) (1978) Long-Tenn Care in Virginia.
Richmond: The Virginia General Assembly.
Vladeck, B. (1980) Unloving Care: The Nursing Home
Tragedy. New York: Basic Books.
Vogel, R. J. (1983) The industrial organization of the
nursing home industry. In R. J. Vogel and H. C. Pal-
mer, eds. Long-term Care: Perspectivesfrom Research
and Demonstrations. Washington, D.C.: Health Care
Financing Administration.
Vogel, R. J., and H. C. Palmer, eds. (1983) Long-
term Care: Perspectives from Research and Demon-
strations. Washington, D.C.: Health Care Financing
Administration.
Waldman, S. (1983) A legislative history of nursing
home care. In R. J. Vogel and H. C. Palmer, eds. Long-
term Care: Perspectives from Research and Demon-
strations. Washington, D.C.: Health Care Financing
Administration.
Waldo, D., and R. Gibson (1982) National health
expenditures, 1981. Health Care Financing Revs 4~1~.
Wallack, S., and J. Greenberg (1984) Public financ-
ing of long-term care: Its relationship to delivery sys-
tems and private sector initiatives. Healthcare Finland
Management (April).
Washington Senate, Select Committee on Nursing
Homes (1978) Report on the Current Rate-Setting and
Cost Reimbursement Systemfor Nursing Homes. A re-
port prepared for the State Senate by Touche Ross and
Company.
Watkins, R., and W. Spicer (1984) Chains report big
revenue gains. Contemporary Administrator.
Weisbrod, B. (1977) The Voluntary Nonprofit Sec-
tor. Lexington, Mass.: D.C. Heath.
Weisbrod, B. A., and M. Schlesinger (1983) Public,
541
private, nonprofit ownership and the response to asym-
metric information: The case of nursing homes. Dis-
cussion paper No. 209, Center for Health Economics
and Law, University of Wisconsin at Madison.
Weissert, W. (1984) Home equity financing of long-
term care. Presentation at the Heatlh Care Financing
Administration Meeting on Long-Term Financing, Jan-
uary 24, Washington, D.C.
Weissert, W. G. (1985) Estimating the long-tenn
care population: Prevalence rates and selected char-
acteristics. Health Care Financing Review 6~4) (Fall).
Weissert, W., and W. Scanlon (1983) Determinants
of institutionalization of the aged. In Project to Analyze
Existing Long-Term Care Data. Final report, Vol. 111
(Contract No. 100-80-0158) Washington, D.C.: U.S.
Department of Health and Human Services.
Weissert, W. G., and W. J. Scanlon (1985) Deter-
minants of nursing home discharge status. Medical Care
23(April):333-343.
Winn, S. (1974) Analysis of selected characteristics
of a matched sample of nonprofit and proprietary nurs-
ing homes in the State of Washington. Medical Care
12:221-228.
Winn, S. (1975) Assessment of cost related charac-
teristics and conditions of long-term care patients. In-
quiry 12:344-353.
Winn, S., and K. M. McCaffree (1976) Character-
istics of nursing homes perceived to be effective and
efficient. The Gerontologist 16:415419.
Zimmer, J. G. (1975) Characteristics of patients and
care provided in health-related and skilled nursing fa-
cilities. Medical Care 13(December):992-1010.
Zimmer, J. G. (1979) Medical care evaluation studies
in long-term facilities. Journal of the American Ger-
zatr~cs Society 27:62-72.
OCR for page 542
Representative terms from entire chapter:
nursing homes
