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Nursing Staff in Hospitals and Nursing Homes: Is It Adequate? (1996)

Chapter: Nursing Facility Quality, Staffing, and Economic Issues

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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Nursing Facility Quality, Staffing, and Economic Issues

Charlene A. Harrington, Ph.D.

Nursing facilities are an important component of a health industry that is increasingly complex. This paper examines the interrelationships of quality, staffing, costs, and ownership. The paper is divided into two sections. First, quality of care in nursing facilities (or nursing homes) is discussed including a review of how to measure quality. The quality of care continues to vary widely with some facilities known to provide exceptional care. On the other hand, two decades of studies have identified poor quality of care provided by some nursing facilities. Federal and state regulatory efforts have been initiated to improve quality but quality continues to be problematic.

Quality problems are closely associated with historic low registered nurse (RN) staffing levels in nursing facilities. Research on the relationship between staffing levels and quality is reviewed. A discussion of data on current staffing levels and appropriate staffing levels is presented along with discussion of current regulatory efforts to ensure adequate staffing.

Quality of care and staffing are intricately related to nursing home economics, discussed in Part II of this paper. The growing demand for nursing home care and the constrained supply of services form the context for examining these issues. Public reimbursement policies and industry resource allocation decisions have direct effects on both staffing levels and quality of care. Political and

Dr. Harrington is chair of the Department of Social and Behavioral Sciences, School of Nursing, University of California, San Francisco.

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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economic factors influence the feasibility of new policies to improve the care for nursing home residents.

Part I: Quality Of Nursing Home Care

Quality of care is the basic product of nursing facility care and the focus of providers, consumers, regulators, and public policymakers. Defining quality has been a difficult process. Traditionally, three types of indicators have been classified by Donabedian (1980) to define and measure the quality of care: structure, process, and outcomes. Structural measures include human, organizational, and material resources (e.g., size, ownership). Because such structural measures are the most objective, reliable, easily measured, and readily available, structural measures have historically formed the basis for quality indicators. Staffing is a structural measure that affects the processes and outcomes of care, but is considered in part to be determined by facility ownership and payment sources. Studies of nursing facilities generally consider the special characteristics of nursing home residents (physical, mental, and social) that could increase the difficulty of providing high quality of care.

Although structural measures assess the availability of resources as a necessary precondition for their use, process measures examine actual services or activities provided to residents. The process of care focuses on providing special care and treatments to prevent problems with outcomes such as cognition, communication and hearing, vision, physical functioning, continence, psychosocial functioning, mood and behavior, oral, nutritional, and dental care, skin condition, and medications (Morris et al., 1990). A number of studies of nursing home quality have examined process measures with nursing home quality (Zimmer, 1983, 1989; Zimmer et al., 1986). The most important approach to quality focuses on individual or group outcomes, but structure and process information are also needed (Kane, 1988; Kane and Kane, 1988).

Measuring Quality of Care

Over the past two decades, many efforts have been undertaken to refine the measures of nursing home quality. Simple unidimensional quantitative measures of quality have frequently been used in research, such as staff hours per patient day (Fottler et al., 1981; Greene and Monahan, 1981; Elwell, 1984), changes in physical functioning (Linn et al., 1977), mortality rates or hospital readmission rates (Lewis et al., 1985; GAO, 1988a,b; Spector and Takada, 1991), the number of deficiencies (Nyman, 1989b), and subjective measures (Hay, 1977).

Moos and Lemke (1984a,b) developed one of the early methods for conducting assessments of residential facilities on multidimensions: the Multiphasic Environmental Assessment Procedure (MEAP). The MEAP measures resources in terms of four conceptual domains: resident and staff characteristics, physical

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

features, policies and services, and the social climate (Moos and Lemke, 1984a,b). The MEAP instruments are expensive to administer and are more appropriate for residential living arrangements than for skilled nursing facilities. Shaughnessy and his colleagues developed measures of nursing home processes of care. Using expert panels, 27 patient problems were categorized into 4 groups: nursing, medical, communicative, and psychosocial problems. Processes were measured through a comparison of the frequency and the provider type for each service rendered with preset standards for such services for each patient problem (Shaughnessy and Kramer, 1989; Shaughnessy et al., 1990).

Kane and colleagues (1983a,b) developed a multidimensional approach to measuring quality of care utilizing data from chart reviews, observations, and interviewer ratings. This approach was utilized in a longitudinal study of nursing home residents (Kane et al., 1983a,b). Gustafson and colleagues (1980, 1990) also constructed an instrument for measuring nursing home quality entitled the Quality Assessment Index (QAI). The QAI is a multidimensional instrument that used expert panels of judges to develop components of quality each with three to seven subcomponents. This instrument was used to measure quality in a 2-day nursing home visit. Zimmerman and colleagues (1985) used the QAI instrument to evaluate the state survey processes in three states for the Health Care Financing Administration (HCFA). The QAI also requires primary data collection that is costly to collect.

All of these instruments use primary data collection from individual residents. They are primarily designed to identify problems with quality for individuals and not to measure facility quality (except for the QAI instrument). Instruments for measuring quality that require primary data collection efforts on residents are costly to administer and impractical for use as a national approach to measuring quality (Harrington, 1990a). In spite of these many efforts, quality measures continue to be difficult to define and measure, especially for individuals with deteriorating conditions such as many of the residents of nursing facilities. Extensive research efforts continue to be needed in order to develop better process and outcome measures.

Variations in Quality of Care

A number of nursing facilities have been noted for providing high quality of care. The National Institute on Aging and the Robert Wood Johnson (RWJ) Foundation both initiated teaching nursing home programs to improve quality of care during the 1980s. The RWJ project was a 5-year program that ended in 1987 in 12 nursing facilities. These programs added geriatric and geropsychiatric nurse practitioners and clinicians to nursing facilities in collaboration with schools of nursing. The findings from the studies of these programs were that these nursing personnel were able to reduce hospitalization rates, bowel and urinary incontinence, and restraint use and to improve care (Mezey and Lynaugh, 1989,

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

1991). These programs were found to be successful and documented in a series of articles and books (Mezey et al., 1989; Shaughnessy and Kramer, 1989).

Poor Quality of Care

The quality of care provided in nursing facilities has long been a matter of great concern to consumers, health care professionals, and policymakers (NCCNHR, 1983). The Institute of Medicine (IOM) Committee on Nursing Home Regulation reported widespread quality-of-care problems (IOM, 1986). The problems were confirmed by the General Accounting Office (GAO, 1987) and the U.S. Senate (1986), which found that many of the nation's nursing facilities were operating at a substandard level by failing to meet minimum nursing home requirements considered to affect residents' health and safety.

A number of clinical practices have been associated with poor patient outcomes. Urethral catheterization may place residents at greater risk for urinary infection and hospitalization or other complications such as bladder and renal stones, abscesses, and renal failure (Ouslander et al., 1982; Ouslander and Kane, 1984; Ribeiro and Smith, 1985). Restraints have been under criticism because their use may cause decreased muscle tone, and increase the likelihood of falls, incontinence, pressure ulcers, depression, confusion, and mental deterioration (Evans and Strumpf, 1989; Libow and Starer, 1989; Burton et al., 1992; Phillips et al., 1993). A recent study by Phillips and colleagues (1993) suggests that the use of physical restraints continues to be a problem and the use of such restraints should require more nursing care and more nursing assistant time. They concluded that residents free of restraints are less costly to provide care to and that this could improve the quality of care and quality of life. Tube feedings also increase the risk of complications including lung infections, aspiration, misplacement of the tube, and pain (Libow and Starer, 1989). The improper use of psychotrophic drugs has been identified as a common problem in nursing facilities in numerous studies (Harrington et al., 1992b). Recent Senate hearings focused on the problems associated with the misuse and inappropriate use of chemical restraints, which the regulations of the 1990 Omnibus Budget Reconciliation Act were designed to reduce (U.S. Senate, 1991).

There are many negative outcomes in nursing facilities that have been identified in numerous studies (Zinn et al., 1993a,b). These include urinary incontinence, falls, weight loss, and infectious disease (Libow and Starer, 1989). Declines in physical functioning that could have been prevented are also important negative outcomes (Linn et al., 1977). Mortality rates or hospital readmission rates are simple outcome measures that are commonly used (Lewis et al., 1985; GAO, 1988a,b; Spector and Takada, 1991). Other common negative outcomes include accidents, behavioral and emotional problems, cognitive problems, psychotropic drugs reactions, and decubitus ulcers (Zinn et al., 1993a,b).

A recent analysis of the On-Line Survey Certification and Reporting (OS-

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

CAR) data showed that state surveyors continue to find problems with nursing home care. Data on all nursing facilities in the United States surveyed in 1993 found that 30 percent were given deficiencies for unsanitary food, 25 percent for inadequate care planning, 20 percent for inadequate sanitary environment, 20 percent for hazards in the environment, 19 percent for failure to maintain personal dignity, 18 percent for improper restraints, 16 percent for having no comprehensive assessment, 15 percent for inadequate infection control, 12 percent for inadequate treatment of incontinence, 12 percent for inadequate activities for residents, and other facilities received deficiencies for other problems (Harrington et al., 1995). (See Table 1.) The frequency of these deficiencies show that quality problems continue to exist in many nursing facilities.

In summary, probably no other type of health care organization has been demonstrated to have as many quality-of-care problems as nursing facilities. These problems have demonstrated the need for continued research and the development of public policies that could improve both the process and outcomes of care.

Regulatory Efforts

In order to participate in the Medicare or Medicaid programs, long-term-care facilities are required to meet federal certification requirements established by HCFA (42 CFR Part 843) under the Social Security Act. Long-term-care facilities include skilled nursing facilities (SNF) for Medicare (Title 18), nursing facilities (NF) for Medicaid (Title 19), and dually-certified facilities (for both Title 18 and 19). State survey agencies are authorized to determine whether SNFs and NFs meet the federal requirements. Surveyors conduct on-site inspections to observe care, review records, and determine compliance. These surveys are used as the basis for entering into, denying, or terminating a provider agreement with the facility.

In the early 1980s, the Reagan administration proposed deregulation of the nursing home industry. At the same time, Congress was concerned about quality-of-care problems in nursing facilities because of reports and complaints by consumer groups. Problems with the regulatory process had been identified in an evaluation of the state survey processes (Zimmerman et al., 1985). Because of the growing concern about nursing home quality, Congress requested a study by the IOM to examine the regulation of nursing facilities. The IOM Committee on Nursing Home Regulation documented quality-of-care problems and recommended revision and strengthening of the federal and state regulatory processes (IOM, 1986). Their recommendations, as well as the active efforts of many consumer advocacy and professional organizations, resulted in Congress passing the Omnibus Budget Reconciliation Act of 1987 (OBRA 87), a major reform of nursing home regulation (OBRA 87, 1987). This legislation was refined under subsequent legislation in 1988, 1989, and 1990.

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

TABLE 1 Deficiencies in Certified Nursing Facilities from the Federal On-Line Survey Certification and Reporting System, United States, 1993

Types of Deficiencies

Percent of Facilities with Deficiency

Process Deficiencies

Unsanitary food (The facility must prepare and serve food under sanitary conditions; F377)

30

Inadequate care plan (The facility must develop a comprehensive care plan for each resident; F295)

25

Inadequate sanitary environment (The facility must provide housekeeping/maintenance services for a sanitary environment; F261)

20

Hazards in the environment (The facility must ensure that the resident environment remains free of accident hazards; F329)

20

Improper restraints (Residents have the right to be free of physical restraints used for discipline or facility convenience; F221)

18

No comprehensive assessment (The facility must make a comprehensive assessment of resident needs; F271)

16

Inadequate infection control (The facility must investigate, control, and prevent infections; F441)

15

Inadequate activities (The facility must provide an ongoing program of activities to meet resident needs; F255)

12

No 24-hour nursing (The facility must provide sufficient numbers of personnel on a 24-hour basis; F354)

5

No RN on duty 7 days a week (The facility must have an RN on duty 8 hours a day for 7 days a week; F356)

5

Outcome deficiencies

Failure to maintain dignity (The facility must promote care for residents that maintains dignity and respect; F241)

19

Inadequate treatment of incontinence (Incontinent residents must receive appropriate treatment; F322)

12

Failure to prevent pressure sores (The facility must ensure that residents without pressure sores do not develop them; F319)

9

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

Types of Deficiencies

Percent of Facilities with Deficiency

Inadequate treatment of pressure sores (The facility must provide necessary treatment to residents with pressure sores; F320)

9

Poor nutrition (The facility must ensure that residents maintain acceptable levels of nutritional status; F331)

9

Abuse of residents (Residents have the right to be free of verbal, mental, and other abuse; F233)

2

NOTE: The relevant deficiency code follows the description of what the facility is obliged to provide.

SOURCE: Harrington et al., 1995.

The nursing home reform legislation in OBRA 87, which was implemented by HCFA regulations in October 1990, mandated a number of changes. First, the regulations eliminated the priority hierarchy of conditions, standards, and elements that were in the prior regulations. Second, the new 1990 regulations mandated comprehensive assessments of all nursing home residents using the new minimum data set (MDS) forms (Morris et al., 1990). Nursing facilities must complete the MDS forms for each resident within 14 days of admission and at least annually in order to assess the functional, cognitive, and affective levels of residents and must use the assessment in the care planning process. The federal survey procedures (conducted by state agencies) check the accuracy and appropriateness of the assessment and care planning process for a sample of residents. Third, more specific requirements for nursing, medical, and psychosocial services were designed to attain and maintain the highest practicable mental and physical functional status (Zimmerman, 1990).

These requirements were specified in new regulations and a detailed set of HCFA interpretive guidelines were developed for use by state surveyors in 1990. The state surveys were redesigned to be more outcome oriented than previously. Such outcome measures include residents' behavior, their functional and mental status, and conditions (e.g., incontinence, immobility, and decubitus ulcers). For example, the regulations established criteria for the use of antipsychotic drugs, prohibited their use without a specific indication of need, and required periodic review and dose reduction unless clinically contraindicated (Zimmerman, 1990). In addition, regulations detailing and protecting residents' rights were added.

One important recent advance was the development of the Nursing Home

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

Resident Assessment System. This system used the nursing home MDS for resident assessment and developed detailed protocols for resident assessment of specific problem areas to guide the care planning process (Morris et al., 1990). The MDS items were field-tested in 1990 and finalized with 15 domains: cognitive patterns, communication and hearing patterns, vision patterns, physical functioning and structural problems, continence, psychosocial well-being, mood and behavior patterns, activity pursuit patterns, disease diagnoses, health conditions, oral and nutritional status, oral and dental status, skin condition, medication use, and special treatments and procedures (Morris et al., 1990). Since October 1990, nursing facilities are required by HCFA to collect MDS data for every resident upon admission, when there are major changes in health status, and at least annually.

Zimmerman is currently developing Quality Indicators (QI) using the Minimum Data Set as a part of the National Nursing Home Case-Mix and Quality Demonstration study funded by HCFA. This effort builds upon his earlier work with the QAI to develop new QIs. Using MDS data on individual nursing home residents, a number of QIs have been developed: accidents, behavioral and emotional problems, cognitive problems, incontinence, psychotropic drugs, decubitus ulcers, physical restraints, weight problems, infections, and others. The QIs for individual residents and for facilities are compared to national norms, taking into account predisposing factors and case-mix factors related to each QI. Quality indicators that may indicate poor quality of care are identified and given to state surveyors to examine in the certification survey process. Using QI data, state surveyors are expected to determine whether or not the identified QIs are the result of, or are related to, poor care processes.

HCFA regulations are being proposed to require nursing facilities to computerize the MDS data, and then the QIs may be a valuable tool for monitoring the quality of nursing home care. The QIs will augment the nursing home survey process that collects and monitors quality of care for facilities for federal Medicare and Medicaid certification.

In November 1994, HCFA (1994a) released its final regulations for the survey, certification, and enforcement of skilled nursing facilities and nursing facilities (42 CFR Parts 401–498). The regulations made changes in the process of surveying and certifying facilities and developed procedures for enforcement. A number of alternative remedies instead of or in addition to termination may be imposed on facilities that do not comply with federal requirements. These include civil money penalties of up to $10,000, denial of payment for new admissions, state monitoring, temporary management, and other approaches. The extent and type of enforcement actions depend upon the scope (whether deficiencies are isolated, constitute a pattern, or are widespread) and severity of violations (whether there is harm or jeopardy to residents). The Health Care Financing Administration is also undertaking new efforts to train state surveyors in using the new survey, certification, and enforcement procedures.

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×
Is Quality Improving?

One question is whether quality of care is improving as a result of increased efforts by the federal government to regulate quality. Consumer groups and anecdotal evidence from providers suggest there are improvements in nursing home care (Cotton, 1993). There are reports that a number of facilities have focused on reducing the inappropriate use of physical and chemical restraints and that the federal survey focus on resident problems represent substantial improvements in the survey process.

The U.S. Office of the Inspector General (1993) concluded that positive improvements are being made in the regulatory process. State budgets for regulation increased and state survey agencies were using the new resident outcome approach. Complaints about nursing facilities, however, were increasing on average by 74 percent, and state facilities expressed concern about their ability to respond to complaints quickly and effectively. The report concluded that work to improve the current survey process continues to be needed (U.S. Office of the Inspector General, 1993). A national evaluation of the survey process also identified a number of areas where improvement is needed in the survey process (Abt Associates and the Center for Health Policy Research, 1993). The recent release of the final federal enforcement regulations for skilled nursing facilities and nursing facilities should also improve the regulatory process (HCFA, 1994a).

It remains to be seen whether these extensive new regulatory efforts can make a substantial impact on improving the quality of care in nursing facilities. Deficiencies issued to facilities have actually declined since OBRA was implemented. The average deficiencies declined from 8.8 per facility in 1991 to 7.9 in 1993 (Harrington et al., 1995). Survey data also show that the percent of facilities without any deficiencies has increased slightly to 11.4 percent in 1993. Although the nursing facilities argue that this is an indication of improvements in quality of care, such declines could indicate problems with the enforcement process.

In summary, in spite of the recent possible improvements in nursing home quality and regulations, the quality of care provided by some nursing facilities is still problematic. The number and type of deficiencies and complaints reported by the state licensing agencies, consumer advocacy groups, families, and residents show poor quality in some facilities.

Nursing Home Staffing
Pre-OBRA Staffing Levels

Staffing is a critical structural factor that affects the processes and outcomes of nursing home care. Staffing levels in nursing facilities have been traditionally

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

low and these are considered to affect quality of care directly. Of the 1.2 million full-time-equivalent (FTE) nursing home employees providing direct or indirect care, the National Nursing Home Survey indicates that about 7 percent were RNs in 1985 (Strahan, 1987). The ratios of nurses to residents has traditionally been substantially below the nurse-to-patient ratios in hospitals. In 1985, the national average was 1 RN per 49 patients in nursing facilities in contrast to a ratio of 1 RN for every 8 patients in hospitals (Jones et al., 1987; Strahan, 1987; Kanda and Mezey, 1991).

Another analysis of the National Nursing Home survey data reported an overall average of 6.3 RNs per 100 beds in 1985 (or 0.063 FTEs per bed). (FTEs can be converted to hours per resident day by multiplying by 35 hours per week for each nurse and dividing by 7 for each resident day.) Converting FTEs to resident hours showed that the average RN hours per resident day was 0.3 hours (19 minutes) in 1985 (Strahan, 1988). Of the total nursing staff in nursing facilities in 1985, 12 percent were RNs, 17 percent were licensed vocational nurses (LVN), and 71 percent were nurses assistants (NA). The total direct care staff was 0.43 FTEs per resident day, or 2.15 hours per resident day (Strahan, 1987).

Similar staffing ratios were identified in a study of 14,000 nursing facilities in 1987 using federal Medicare and Medicaid Automated Certification Survey (MMACS) data (now referred to as OSCAR data). Zinn (1993b) found that the average number of RNs per resident over 24 hours was 0.04 FTEs, licensed practical nurses (LPN) per resident was 0.09 FTEs, and aides per resident was 0.32 FTEs. The total direct care staffing per resident was an average of 0.45 FTEs per day. Zinn (1993a) found wide variations in nursing home staffing patterns in 10 standard metropolitan statistical areas, even after controlling for case-mix differences in residents using 1987 MMACS survey data. The number of RNs per resident over 24 hours varied from 0.01 FTEs in Oklahoma to 0.08 FTEs in Boston.

OBRA 87 Nurse Staffing Minimum Standards

The IOM Committee on Nursing Home Regulation recommended that nurse staffing standards be increased to improve the overall quality of nursing care (IOM, 1986). Following this recommendation, Congress increased the minimum standards for nursing home staffing in OBRA 87. This legislation was implemented in the 1990 Medicare and Medicaid regulations for SNFs and NFs, requiring a RN director of nursing, an RN on duty for 8 hours a day, 7 days a week, and a licensed nurse (either an RN, a licensed practical/vocational nurse, or both) on duty around the clock for nursing facilities (HCFA, 1991). OBRA 87 also required that nursing assistants must receive minimum training (75 hours) and be tested for competency. In addition, sufficient nursing staff were required to provide nursing and related services to attain or maintain the highest practicable

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

level of physical, mental, and psychosocial well-being of each resident (HCFA, 1991).

Staffing regulations for Medicare skilled nursing facilities are the same as for Medicaid, where both are required to meet the actual care needs of clients. Because Medicare skilled nursing residents have higher care needs than Medicaid residents, Medicare has traditionally had higher staffing levels. Many Medicare certified beds are in acute care facilities where staffing levels have been higher than in freestanding facilities. Medicare payment rates are substantially higher than Medicaid rates to take these higher resident care and resource needs into account (Dor, 1989).

The OBRA 87 legislation allowed for waivers to the minimal nursing facility staffing requirements in areas where it may be difficult to hire RNs. Staffing waivers for Medicaid-only certified facilities (Title 19) can be granted by states, whereas staffing waivers for facilities with both Medicare and Medicaid certification (Title 18 and 19 facilities) or Medicare-only certified facilities (Title 18 only) must be granted by HCFA. The law allows the 24-hour licensed nursing coverage requirements and the 8 hours of RN coverage for 7 days a week to both be waived by states, but Medicare facilities are only allowed to have waivers for the 8 hours of RN coverage for 2 out of 7 days a week.

Recent data from HCFA (1994b) reported that 518 facilities in 13 states had been granted waivers for Medicaid-only facilities by states through 1994. These included 66 waivers for the 24-hour licensed nursing coverage and 490 waivers for the 8 hours of RN coverage. As of March 1994, only 16 waivers had been given to Medicare skilled nursing facilities (Title 18 and 19 or Title 18 only) for the 8 hours of RN coverage by HCFA. At this point, HCFA has not released guidelines to the states for issuing waivers. Perhaps the number of waivers will decline as the availability of RNs improves with recent layoffs of hospital nurses.

Mohler surveyed states regarding their staffing requirements for nursing facilities. She found that the majority of states had specific minimum staffing standards in addition to the federal standards for nursing facilities. These standards varied across states with some states specifying standards for RNs, others for nursing assistants, and still other states having standards for both (Mohler, 1993). Minnesota required a minimum of 2 hours of nursing care per resident day for all licensed nursing facilities but these were not required to be distributed evenly across the evening or night shifts (Chapin and Silloway, 1992). States are allowed to impose state penalties for facilities who have substandard staffing according to state regulations. Thus, the data demonstrate that minimum staffing standards for nursing facilities are considered necessary by most states, as well as by the federal government.

Staffing Levels After OBRA 87

Data from the 1991 National Health Provider Inventory identified 15,511

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

nursing facilities with 1,457,703 million residents (Moses, 1994a). For this group of residents, there was a national ratio of 0.069 RN FTEs per resident and a total of 0.55 direct care staff FTEs per resident (Moses, 1994a). When FTEs were converted to hours per resident day, the total RNs per resident day was 0.35 hours (21 minutes), and the total direct care staff was 2.75 hours per resident. This showed a slight increase in overall staff ratios over the 18 minutes of RNs time and 2.15 hours of total staff time per resident day reported above on the 1985 national nursing home survey (Strahan, 1988). These ratios do not, however, include vacation and sick time estimates. Moreover, the above estimates assume that staff are evenly distributed over 24 hours, which is not generally the situation. Most health facilities have fewer staff on evening and night shifts because there are somewhat fewer care activities than during the day. Staffing is usually lower on holidays and weekends, in terms of both licensed personnel ratios and total numbers of staff.

Detailed staffing data collected by state surveys were available from the federal OSCAR system. Staffing ratios from OSCAR were examined separately for Medicaid-only (Title 19) facilities and for Medicare-only (Title 18) or Medicare and Medicaid facilities (Title 18 and 19) surveyed during the calendar years of 1991, 1992, and 1993. These data were cleaned to eliminate facilities that appeared to be reporting erroneous data. This eliminated about 1 percent of facilities that reported low staffing levels and a little over 2 percent that reported high staffing levels (Harrington et al., 1995).

This analysis showed the ratio of RNs was 0.3 hours (18 minutes) per resident day, of LPN or LVN hours was 0.6, and of NA hours were 2.0 for a nursing total of 2.9 hours per resident day in about 12,000 Medicaid-only facilities for the 3-year period (Harrington et al., 1995). (See Table 2.) As expected, staffing levels for facilities with both Medicare and Medicaid certification were substantially higher, but this included only about 1,200 facilities. For these facilities the RN hours per resident day increased from 1.0 in 1991 to 1.4 in 1993 (84 minutes). The LPN or LVN hours per resident day increased from 1.2 in 1991 to 1.5 in 1993. The NA hours per resident day increased from 2.4 to 2.7 over the 3-year period. The total nursing hours per resident day increased from 4.4 in 1991 to 5.2 in 1993 (Harrington et al., 1995). Thus, staffing levels for all categories increased somewhat over the 3-year period for facilities with both Medicare and Medicaid certification, but essentially no change was observed for facilities with only Medicaid certification.

Data from OSCAR showed that there was a total of 56 facilities in 20 states in the United States that did not report any RN hours in 1991, 112 facilities in 1992, and 96 facilities in 1993 (Harrington et al., 1995). It was not known whether this was a result of reporting errors or represented an actual absence of RN staff. State surveyors did give nursing facilities deficiencies for failure to meet the minimum staffing levels. Five percent of facilities were given deficien-

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

TABLE 2 Nurse Staffing Levels for All Certified Nursing Facilities from the Federal On-Line Survey Certification and Reporting System, 1991–1993

 

Year

Nurse Staffing Levels

1991

1992

1993

Medicaid-Only Facilities

Number of facilities

9,120

12,463

12,132

Hours per resident day

RNs

0.3

0.3

0.3

LPNs

0.6

0.6

0.6

NAs

2.0

1.9

2.0

Total nurse hoursa

2.9

2.8

2.9

Medicare/Medicaid and Medicare-Only Facilities

Number of facilities

819

1,110

1,234

Hours per resident day

RNs

1.0

1.2

1.4

LPNs

1.2

1.4

1.5

NAs

2.4

2.5

2.7

Total nurse hoursa

4.4

4.8

5.2

NOTE: RN = registered nurse; LPN = licensed practical nurse; NA = nurse assistant.

a The columns do no necessarily add to the total nurse hours because the number of facilities is not the same in each category. The number represents the national average for facilities on which data are available.

SOURCE: Harrington et al., 1995.

cies for failure to have 24-hour nursing staff and 5 percent for failure to have RNs on duty 7 days a week in 1993 (Harrington et al., 1995).

As noted above, some reporting problems with the current OSCAR staffing data were identified (Harrington et al., 1995). Actual staffing levels in nursing facilities may be lower than the levels reported on OSCAR because of over-reporting, reporting errors, or both. Staffing data are reported to HCFA by facilities. Such data are not always audited nor confirmed by state surveyors. Moreover, HCFA guidelines for determining minimum staffing violations are not available.

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×
Poor Nursing Compensation and its Consequences

Low compensation levels (salaries and benefits) have been a historic problem for nurses in nursing facilities compared with hospitals. The overall average annual earnings of RNs employed full-time in nursing facilities was $33,846 in 1992. This overall RN average was 14 percent lower in nursing facilities than in hospitals. Average staff nurses in nursing facilities had annual earnings 17 percent below average hospital staff nurses. This was especially low considering that RNs working in nursing facilities were more likely to be administrators (24 percent) than nurses in hospitals (3 percent). In fact, the average salary of nursing home nurses was lower than salaries in any other setting except for those in student health care services (Moses, 1994b).

In 1992, the average salary and benefits per FTE in nursing facilities (includes all nursing and nonnursing employees) were reported to be $20,238 by HCIA and Arthur Andersen (1994). This level was lower in investor-owned facilities ($19,961) and system-affiliated facilities ($20,642) and higher in nonprofit facilities ($21,676). Salary levels were also lower in smaller facilities. The fact that many nursing facilities do not provide their employees with health benefits is also a problem. Recently, the American Health Care Association (AHCA) estimated that if mandatory national health insurance were adopted by Congress, nursing facility costs passed on to Medicaid would increase by $1 billion and costs to Medicare would increase by $100 million. The 1994 average health insurance costs for nursing facilities were estimated to be 3.9 to 5.9 percent of payroll. If all employees were provided health benefits, the health insurance costs would increase to 7.9 percent of payroll (AHCA, 1994).

Poor nursing home compensation encourages nurses to seek alternative employment in other health positions or outside the industry in better working environments. The traditionally high employee turnover rates in some facilities are directly related to low salaries and benefits (Harrington, 1990b). Nursing home nurses have had higher turnover rates than hospital nurses. Only 82 percent of the RNs reported working in a nursing home in the previous year compared with 92 percent for hospital nurses (Moses, 1994b). Munroe (1990) found turnover rates of over 100 percent in California nursing facilities in 1986. Where there is an adequate supply of nursing personnel some nursing facilities may encourage high turnover rates as a means of keeping average wage rates low (Harrington, 1990b). High turnover rates reduce the continuity of care and are expected to have a negative impact on quality of patient care (Harrington, 1990b). Munroe (1990) found that high RN turnover was associated with poor quality (in terms of the number of deficiencies given a facility) in a study of California nursing facilities.

Zinn (1993b) found that nursing facilities adjust staffing and care practices to local market conditions as would be expected. Her study of 14,000 nursing facilities in 1987 found that nursing facilities respond to local economic factors.

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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In areas where RN wages were higher, nursing facilities employed more nonprofessional nursing staff. Registered nurse staffing levels were higher in facilities with more private pay residents and nonprofit nursing facilities. Thus, controlling for resident characteristics, nursing facilities have economic incentives to hire fewer nursing personnel in high-cost market areas.

Inadequate Educational Training

There are many concerns about the adequacy of the education and training of nursing home personnel. The 1992 national survey of registered nurses estimated that 128,983 RNs were working in nursing facilities or extended care facilities (Moses, 1994b). Of those working in nursing facilities, nurses were more likely to have lower levels of educational preparation (45.5 percent of nursing home nurses had diplomas compared with only 27.5 percent in hospitals) and less likely to have a baccalaureate or master's degree. These lower education levels may be related to the low salaries and benefits in nursing facilities. In other situations, facilities may employ nurses with less education as a means of keeping salaries low. At the same time, nurses with higher education levels can be expected to seek employment in hospitals and other settings where they can receive higher wages and benefits, leaving nurses with less education for those facilities with lower salaries.

Another concern is the inadequate training that most nursing home personnel have had in geriatrics and gerontological nursing. A specialty area has developed in gerontological nursing with a strong knowledge base that argues for the necessity of geriatric training to improve the quality of care for the aged (Matteson and McConnell, 1988). The increased complexity of care required for nursing home residents (Shaughnessy et al., 1990) makes the need for specialty training even greater. Nursing facility directors of nursing and supervisors need advanced training in gerontology but few have such training.

Geriatric nurse practitioners (GNP) can improve the quality of care, including both nursing and primary care, for geriatric residents. Kane and colleagues (1988), in a study of GNPs employed in 30 nursing facilities, found that in spite of the difficulties in developing new roles for GNPs two-thirds of the facilities were enthusiastic about the program. Kane and colleagues (1989) in the same study also found modest improvements in the process of care but no consistent changes in health outcomes. Buchanan and colleagues (1990) found that the employment of GNPs does not adversely affect nursing home costs or profits, and that GNPs do reduce the use of hospital services. GNPs can provide special geriatric care to address common problems of nursing home residents and can provide geriatric training for staff. These studies used GNPs as consultants to the facilities, and not in primary care roles for patient management. Using GNPs in primary care roles, as substitutes for physician care, may be expected to have a greater beneficial effect than using GNPs as specialty nursing employees

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

(Buchanan et al., 1990). As noted above, the teaching nursing home programs have clearly demonstrated the value of using geriatrically trained nurses in improving patient care outcomes (Mezey and Lynaugh, 1989, 1991).

The level of training of nursing assistants has also been problematic. Even though OBRA 87 required 75 hours of training and competency testing, there is evidence that this is an inadequate level of training. California requires nursing assistants to have a minimum of 120 hours of training. Additional training could assist in improving the quality of care, especially if training is tied to problems of care identified in facilities. Improved training could also reduce turnover rates and reduce the number of injuries that staff sustain, which has been documented to be higher than in other types of health care organizations.

Staffing and Resident Characteristics

There is uniform agreement that there is a strong relationship between resident characteristics, nurse staffing time requirements, and nursing costs in nursing facilities. Numerous studies have examined these relationships and attempted to quantify the relationships (Weissert et al., 1983; Arling et al., 1989). Fries and Cooney (1985) studied resident characteristics were studied in terms of staffing resources in facilities judged to offer high quality of care in the development of the Resources Utilization Groups (RUG). Additional studies were used to create an updated RUGS-II (Schneider et al., 1988) and RUGS-III (Fries et al., 1994). RUGS-III was developed with 44 resident groups that were defined to explain 56 percent of the resource utilization variance (Fries et al., 1994). Thus, heavy-care residents have been shown to require more nursing staff time than other residents.

Staffing Levels and Quality of Care

Not surprisingly, higher staffing levels in nursing facilities have been associated with higher quality of care. One of the early studies that documented this relationship found that homes with more RN hours per patients were associated with patients being alive, having improved physically, and being discharged to home (Linn et al., 1977). Fottler and colleagues (1981) used RN hours and total nursing hours as the key indicator of quality of care in their study of profits. Nyman (1988b) found that higher nursing hours per resident were significantly and positively associated with three of eight quality measures in Iowa nursing facilities. Nyman and colleagues (1990) found in a study of nursing facilities that facilities with a higher percentage of nurse supervisory hours were more efficient and that the percentage of administrator hours was not related to efficiency. He also found that the quality of life in a nursing home was associated with the general staffing level. Nyman (1988b) showed that quality in nursing facilities is not associated with cost and that quality can be improved.

Gustafson and colleagues (1990) found a significant correlation between

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

staffing and six measures of quality incorporated into the QAI index. Munroe's (1990) study of skilled nursing facilities found a positive relationship between nursing home quality (using number of health-related deficiencies received) and the number of RN and LVN nursing hours provided.

Spector and Takada (1991) examined 2,500 nursing home residents in 80 nursing facilities in Rhode Island and found that low staffing in homes with very dependent residents was associated with reduced likelihood of improvement. High rates of urinary catheter use, low rates of skin care, and low resident participation rates in organized activities were all associated with poor resident outcomes. Low RN turnover was also associated with an increased likelihood of functional improvement.

Zinn (1993a) found wide variations in nursing home staffing patterns in 10 standard metropolitan statistical areas, even after controlling for case-mix differences in residents using 1987 MMACS survey data. No consistent relationship was found between staffing levels and prevalence rates of poor outcomes (defined as the percentage of pressure ulcers, catheterized residents, residents not toileted, residents with tube feedings, and residents restrained).

Zinn (1993b) also conducted a study using data from 14,000 nursing facilities from the federal MMACS survey data in 1987. Using a weighted two-stage least squares regression model controlling for case-mix, she found that higher RN wages were associated with lower ratios of RN staff to residents employed by nursing facilities. Higher RN wages and fewer RNs were associated with higher use of urinary catheters, physical restraints, tube feedings, and with residents not being toileted. These negative resident conditions were also more likely to be associated with greater case-mix severity, lower private pay rates in a county, higher proprietary ownership, and less concentration of the nursing home market (each facility's market share of total beds). The results suggested that where there were incentives to hire less nursing staff, facilities used more labor-saving devices, such as catheters, that can cause poor outcomes for residents.

Another recent study of nursing facilities using the 1987 data from 449 freestanding nursing facilities in Pennsylvania found, after controlling for case-mix, that nonprofit nursing facilities provided significantly higher quality of care to Medicaid beneficiaries and to self-pay residents than did for-profit nursing facilities (Aaronson et al., 1994). Nonprofit facilities had higher staffing levels and fewer adverse outcomes from pressure sores controlling for case-mix, but no difference in restraint use was found.

As noted above, reductions in the levels of RN staffing because of recent controls on Medicaid reimbursement and prospective payment for hospitals and subsequent reductions in staffing levels are growing concerns for quality of care (Kanda and Mezey, 1991). The preponderance of evidence from a number of studies with different types of quality measures has shown a positive relationship between nursing staffing and quality of nursing home care. Thus, it can be

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

concluded that lower staffing levels are related to poor process and outcome measures of nursing facility quality.

Appropriate Nurse Staffing Standards

Ideal nurse staffing standards are difficult to develop. In 1987, a panel of nurse experts from the Executive Committee of the Council on Nursing Administration of the American Nurses' Association proposed a minimum staffing approach for nursing facilities based on expert opinion (Turner, 1987). They recommended one full-time RN director of nursing and that at least one RN be on duty 24 hours a day, 7 days a week. In addition, facilities over 120 beds or more were recommended to have 2 additional RNs (one as an assistant director of nursing and one as an in-service education coordinator). The ratio of licensed nurses to residents was recommended at a minimum ratio of 1 to 30 during the day, 1 to 45 during the evening, and 1 to 60 at night. In addition, they recommended that direct caregivers ratios (including RNs, LVNs, and NAs) should be established at 1 to 8 during the day, 1 to 10 in the evening, and 1 to 15 at night. Mohler and Lessard (1991) reported that only 5 percent of the nursing facilities would have met this staffing standard in 1988, based on an analysis of staffing data from the MMACS/OSCAR system.

In order to develop a standard methodology for determining minimum staffing standards, the U.S. Army Headquarters (1990) conducted a workload management study of nursing services. This study recommended a minimum of one RN and one assistant for every nursing unit for every shift for hospitals. Additional staff requirements were developed based on patient characteristics and according to a standard methodology that was used for each unit and each shift. This system for determining nursing staff needs was adopted by the Department of Defense as a model for determining minimum standards for nursing facilities.

Another approach to appropriate staffing standards is to consider the current staffing patterns in Medicare certified facilities. As noted above, the average Medicare certified facility had 1.4 hours of RNs care per resident and a total of 5.2 hours of nursing care per resident. This level could be a target for Medicaid-only certified facilities.

Some nursing home association representatives have argued that current nursing staffing patterns are adequate. In contrast, many nursing experts and consumer groups have argued that the current minimum HCFA nursing standards are too low and should be increased (Mezey et al., 1989). Moreover, consumers suggest that the OBRA requirement for ''sufficient staff" does not provide clear direction to nursing facilities and adequate protection of residents (NCCNHR, 1994). They suggest that HCFA expand and detail the minimum standards and develop guidelines for state survey agencies to determine whether or not facilities are complying with the staffing guidelines.

There are two basic approaches to improving nurse staffing levels. One is to

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

mandate stricter staffing levels per resident through federal or state legislation and regulations. This would require changes in the current OBRA 87 legislation, or regulations, or state legislation. Another approach is to change reimbursement policies for nursing facilities or to change the economic incentives to increase staffing levels. Issues of economic and reimbursement policies are discussed in the following section.

Part II. Economic Issues: Nursing Home Market Demand

The demand for nursing home services is growing with the increasing numbers of individuals who are aged and chronically ill. In 1990, there were about 32 million Americans who were age 65 and older and this number is projected to increase to 64 million in 2030 (Zedlewski and McBride, 1992). As the population ages and develops chronic illnesses, the need for long-term-care services, including nursing home services, increases. The total risk for becoming a nursing home patient after age 65 is 43 percent and peaks at age 75 to 80 (Murtaugh et al., 1990). The number of elderly needing nursing home care is expected to increase from about 1.8 million in 1990 to 4.3–5.3 million in 2030, depending upon the projection assumptions (Zedlewski and McBride, 1992; Mendelson and Schwartz, 1993).

The demand for nursing facilities to provide more complex services is growing with the increased age and disability of the residents, shortened hospital stays, and early discharge programs. The degree of medical instability, impairment, and severity of illness in nursing home residents is increasing (Hing, 1989; Shaughnessy et al., 1990; Kanda and Mezey, 1991). Medical technology formerly used only in the hospital has been transferred to nursing facilities. The use of intravenous feedings and medication, ventilators, oxygen, special prosthetic equipment and devices, and other high technologies has made nursing home care more difficult and challenging (Harrington and Estes, 1989; Shaughnessy et al., 1990). Thus, changes in characteristics of nursing facility residents are placing greater demands on nursing care of residents. Nursing facility residents with greater levels of disability require greater professional care and supervision, evaluation, and resources than in the past.

Several federal policy changes in the 1980s have contributed to an increase in nursing home demand and government expenditures for nursing home services. The adoption of prospective payment systems (PPS) for hospitals by Medicare in 1983 resulted in shortened hospital stays and increased the number of referrals and admissions to nursing facilities (Guterman et al., 1988; Neu and Harrison, 1988; Latta and Keene, 1989; U.S. House of Representatives, 1990). In April 1988, HCFA issued new Medicare clarifying guidelines to the fiscal intermediaries regarding the administration of Medicare payments to nursing facilities that expanded coverage somewhat (U.S. House of Representatives, 1990). The

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

1988 Catastrophic Health Care legislation also expanded Medicare nursing home coverage, but this was repealed in 1989 with no overall increase. Legislation in 1988 established a minimum level of asset and income protection for spouses when determining Medicaid nursing home eligibility, which also contributed to an increase in Medicaid program costs (Letsch et al., 1992). These policy changes have all encouraged the demand for nursing home services and thereby the costs of Medicaid and Medicare.

States have also adopted policies to control Medicaid nursing home demand including Medicaid eligibility policies and preadmission screening programs (Ellwood and Burwell, 1990; HCFA, 1992a,b; Harrington et al., 1994c). These policies may have had a constraining effect on demand and consequently the growth in nursing home capacity.

Alternatives to or substitutes for nursing home care are expanding rapidly, which may reduce the demand for nursing home care. Federal Medicare policies expanded coverage for such services have dramatically increased during the past 5 years. The number of home care agencies and the volume of home care services have increased dramatically (Letsch et al., 1992; NAHC, 1993). In addition, states have attempted to expand alternatives to institutional care under the Medicaid home-and community-based waiver programs (Section 2176 of the Omnibus Budget Reconciliation Act of 1981, P.L. 97-35). Several legislative changes have further expanded Medicaid waivers (HCFA, 1992b; Gurny et al., 1993). These programs have increased the utilization of home-and community-based services during the past decade (Justice, 1988; Lipson and Laudicina, 1991; Miller, 1992; Folkemer, 1994). These types of programs may be reducing the demand for nursing facility care in some areas. On the other hand, these programs may be increasing as a response to the limited supply of nursing home beds in some areas.

Supply of Nursing Home Services

The capacity of long-term-care facilities to meet the demand for services has been strained during the past decade. The total number of licensed nursing facilities (including SNFs and NF that are both freestanding and hospital-based) was 16,959 in 1993 (DuNah et al., 1995). (See Table 3.) These nursing facilities had 1.74 million beds in 1993. In addition to these facilities, there was a total of 6,296 licensed intermediate care facilities for the mentally retarded (ICF-MR) with 136,697 beds in 1993. All states license some residential care (other than nursing facilities), depending upon each state law. These residential care facilities included board and care, personal care, foster care, and assisted living facilities. There were 39,080 licensed residential care facilities reported for the aged with 642,601 beds in 1993 (Harrington et al., 1994b). (See Table 3.) In addition, there were about 13,169 board and care facilities with 120,636 beds for the

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

TABLE 3 Licensed Long-term Care Providers, United States, 1992 and 1993

Provider Type

Providers in 1992

Providers in 1993

Percent Change

Nursing home facilities

16,800

16,959

1.0

Intermediate care facilities for the mentally retarded

5,894

6,296

6.8

Residential carea facilities

34,871

39,080

12.1

Home care agencies

8,117

10,084

24.2

Adult day care agencies

1,517

2,131

40.5

a Includes board and care, personal care, assisted living, and other categories of residential care for the aged that are licensed by states. Categories vary by state.

SOURCE: Harrington et al., in press.

mentally retarded in 1991 according to the national health provider inventory (Sirrocco, 1994).

Growth trends are useful to examine over time. The number of licensed nursing facilities increased by about 2 percent annually during the 1978 to 1993 period and 1 percent between 1992 and 1993 (DuNah et al., 1995). (See Table 3.) Based on past growth trends, future bed growth for nursing facilities can be expected to be only about 2 percent annually. The number of ICF-MR facilities (data on beds are unavailable) increased by 7 percent between 1992 and 1993 (Harrington et al., 1994b). The growth in residential care beds for the aged has been about 11 percent annually over the 1983 to 1993 period and 12 percent between 1992 and 1993 (Harrington et al., 1994c). In contrast, the number of licensed home health care agencies increased by 24 percent between 1992 and 1993 and licensed adult day care agencies increased by 41 percent. (See Table 3.)

One key concern is whether the growth in beds is keeping pace with the aging of the population. Previous studies have shown that growth has failed to meet the demand in some areas (Feder and Scanlon, 1980; Scanlon, 1980a,b; Nyman, 1985, 1989b, 1993; Bishop, 1988). The most recent data show that in 1993 the states on average had 53.0 licensed nursing facility beds per 1,000 people aged 65 plus (DuNah et al., 1995). The U.S. bed ratio for the aged 65 and over remained essentially flat over the past 16 years. On the other hand the population over age 85, who are the greatest users of nursing home services, was growing more rapidly than nursing home beds. The average number of nursing facility beds dropped from 610 per 1000 aged 85 and over in 1978 to 491 in 1993 (a 19.6 percent decline) (DuNah et al., 1995). (See Table 4.) Thus, the beds in most states are failing to keep pace with the growth in the oldest old population.

The variation in nursing facility bed ratios across states and regions is substantial. (See Table 4.) The north central region had the highest ratio (597

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

TABLE 4 Ratio of Licensed Nursing Home Beds per 1,000 Population Aged 85 and Over

 

1978

1982

1986

1990

1993

Percent Growth 1978–1993

Alabama

597.8

538.2

488.0

430.7

398.2

-33.4

Alaska

1,426.6

998.8

833.0

677.8

578.7

-59.4

Arizona

308.9

305.0

460.4

416.6

350.2

13.4

Arkansas

752.7

689.3

689.0

611.3

597.1

-20.7

California

534.6

461.8

419.3

405.8

379.0

-29.1

Colorado

860.6

677.5

600.8

590.5

521.3

-39.4

Connecticut

706.9

652.0

638.3

609.1

595.3

-15.8

District of Columbia

257.2

237.1

303.1

330.7

321.0

24.8

Delaware

556.0

587.6

571.5

606.6

680.2

22.4

Florida

337.7

303.2

305.8

305.1

294.3

-12.9

Georgia

830.1

771.3

666.3

606.7

558.0

-32.8

Hawaii

478.7

403.7

353.7

323.2

288.9

-39.7

Idaho

571.5

505.9

477.2

476.8

438.9

-23.2

Illinois

785.0

699.0

661.8

639.4

622.0

-20.8

Indiana

807.0

853.4

790.2

806.2

758.2

-6.1

Iowa

707.9

655.3

639.7

593.3

612.5

-13.5

Kansas

809.4

720.5

677.7

704.2

636.0

-21.4

Kentucky

483.7

472.6

470.9

472.5

469.5

-2.9

Louisiana

695.9

666.0

741.1

714.0

662.0

-4.9

Maine

635.6

553.4

555.1

520.6

490.4

-22.8

Maryland

635.9

590.3

554.2

554.8

525.0

-17.4

Massachusetts

590.3

507.7

508.3

536.3

520.1

-11.9

Michigan

591.7

505.0

494.3

469.4

421.5

-28.8

Minnesota

794.0

714.6

696.1

640.9

601.7

-24.2

Mississippi

471.1

483.1

475.4

424.2

410.4

-12.9

Missouri

601.8

648.0

646.2

665.6

627.0

4.2

Montana

721.9

643.8

664.7

596.5

532.4

-26.2

Nebraska

809.6

707.6

667.6

663.8

621.6

-23.2

Nevada

621.4

500.4

436.2

397.2

359.6

-42.1

New Hampshire

646.8

603.3

539.2

492.2

461.1

-28.7

New Jersey

419.6

413.3

438.6

473.0

439.1

4.6

New Mexico

339.4

387.4

453.1

424.4

388.7

14.5

New York

457.2

410.4

397.7

390.2

387.3

-15.3

North Carolina

422.7

421.9

383.0

378.4

453.8

7.4

North Dakota

730.7

723.2

671.1

610.8

560.5

-23.3

Ohio

627.6

614.9

647.9

640.2

586.2

-6.6

Oklahoma

822.5

749.3

728.7

707.9

664.9

-19.2

Oregon

542.9

478.1

427.3

383.9

328.1

-39.6

Pennsylvania

530.5

521.7

523.8

495.0

468.6

-11.7

Rhode Island

722.8

653.6

664.0

628.2

603.0

-16.6

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

 

1978

1982

1986

1990

1993

Percent Growth 1978–1993

South Carolina

533.2

528.8

449.5

437.4

422.4

-20.8

South Dakota

733.2

667.5

623.4

607.1

577.4

-21.3

Tennessee

479.7

560.5

553.6

567.2

528.2

10.1

Texas

952.4

810.7

718.9

693.8

635.1

-33.3

Utah

683.0

539.2

538.8

517.2

438.2

-35.8

Vermont

487.2

448.6

467.2

465.0

427.0

-12.4

Virginia

420.7

450.7

411.1

447.1

435.9

3.6

Washington

719.1

598.2

516.7

508.4

449.1

-37.6

West Virginia

285.0

329.3

362.0

381.8

372.6

30.7

Wisconsin

955.8

840.4

779.8

662.0

603.6

-36.9

Wyoming

573.9

538.4

538.8

626.5

592.9

3.3

North Central

729.5

679.9

659.9

636.8

597.4

-18.1

North East

516.8

477.7

475.5

470.3

453.6

-12.2

South

594.5

552.9

520.7

504.2

455.1

-23.5

West

571.7

488.9

454.8

436.5

383.6

-32.9

United States

610.3

559.5

537.0

520.3

479.7

-21.4

 

SOURCE: DuNah et al., 1995.

nursing facility beds per 1,000 population aged 85 and over) and the west had the lowest (395 beds) in 1993 (DuNah et al., 1995). The beds per 85 and over aged population declined the most in the west (31 percent), the south (19 percent) and the north central regions (18 percent) (DuNah et al., 1995).

The average occupancy rates for U.S. nursing facilities was reported by states to be 91 percent (or about 1,582,000 residents) in 1992 and 1993 (DuNah et al., 1995). Average occupancy rates were higher (94 percent) for ICF-MR facilities. Although the occupancy rates were generally high for nursing facilities, states did show a wide range in rates. Occupancy rates were highest in the northeastern states (97 percent in 1993), about average in the southern and north central states, and lowest in the west (88 percent) in 1993. A recent survey of state officials reported that some states are considered to have an undersupply while others reported an oversupply of nursing facility beds (DuNah et al., 1995). Thus, some areas and states may have shortages of nursing home services and others may have an adequate or oversupply of nursing home beds (Swan and Harrington, 1986; Wallace, 1986; Harrington et al., 1992a, 1994a; Swan et al., 1993b; DuNah et al., 1995). Areas with shortages are of concern because they may limit access for those in need of services.

State Medicaid programs have undertaken a number of policy initiatives to

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

control supply and reduce spending on nursing home care. This began in the early 1980s, when federal budget cuts to state Medicaid programs became standard features of the budget process (Bishop, 1988). The most important policies affecting the supply of long-term-care bed supply are state certificate-of-need (CON) programs.

The health planning and CON program established in 1974 (P.L. 94-641) gave states considerable authority and discretion to plan and control the capital expenditures for nursing facilities and other health facilities (Kosciesza, 1987). The effectiveness of CON policies in controlling bed supply has been widely debated and the policies opposed by many providers (Cohodes, 1982; Friedman, 1982; Swan and Harrington, 1990; Mendelson and Arnold, 1993). These controversies resulted in the federal repeal of the program in 1986 (Kosciesza, 1987).

Even after the federal repeal of the program, 44 states continued to use CON, moratoria policies, or both to regulate the growth in nursing facilities in 1993. In 1993, 31 states had CON, moratoriums, or both for ICF-MR facilities and 9 had CON for residential care. CON and moratoria policies for nursing facilities have been found to be associated with lower growth in bed ratios and higher occupancy rates (Harrington et al., 1994a). Other studies have shown that lower nursing home bed supply is associated with lower costs to the Medicaid program (Harrington and Swan, 1987; Nyman, 1988a). Thus, because of the cost pressures on states, we can expect most states to continue their efforts to limit the supply of nursing home beds even though their bed supply is not keeping pace with the aging of the population.

Market Competition Effects

Medicaid nursing home days of care account for a major proportion of all patient days (Levit et al., 1994). Nevertheless, most nursing facilities prefer private clients because facilities can generally charge private-paying residents higher daily rates than Medicaid (Scanlon, 1980a,b; Lee et al., 1983; Phillips and Hawes, 1988; Buchanan et al., 1991). Buchanan and colleagues (1991) estimated that private patient payment rates for nursing home care was 20 percent per day higher than Medicaid rates in 1987. Unfortunately, data on private pay rates for nursing facilities are generally unavailable.

Nursing facilities also tend to prefer those patients that are the least sick (unless they receive higher rates for sicker patients under case-mix reimbursement) or for whom they can provide the most cost efficient care (Holahan and Cohen, 1987; Kenney and Holahan, 1990; Falcone et al., 1991). When nursing facilities are selective in their admission policies, the access to care of those individuals with the greatest need may be limited. Where the supply of nursing home beds is limited, problems in gaining access to needed services may be exacerbated (Kenney and Holahan, 1990; Falcone et al., 1991). As noted above,

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

nursing home bed capacity varies substantially across different states and regions in the United States (DuNah et al., 1995).

Access problems have been documented by waiting lists for nursing facilities, high nursing home occupancy rates, and delayed hospital discharges in some geographical areas (GAO, 1990). These access problems can have negative consequences for consumers and public payers. Kenney and Holahan (1990) found that limited nursing home bed supply in some areas is an important determinant of hospital discharge delays, which can add to the overall costs of hospital care. Nyman (1985, 1989b) argued that excess nursing home demand also can cause serious problems in the quality of nursing home care, especially for Medicaid nursing home residents. Nyman (1989b) found that nursing facilities had substantially fewer violations for poor quality of care in areas of Wisconsin where there were more available nursing home beds. In areas with an abundant supply of nursing home beds Medicaid recipients should have greater access to care, but this depends in part on the Medicaid reimbursement rates in relationship to the marginal costs of operation (Nyman, 1985, 1989b).

Nursing Home Expenditures and Sources of Payment

Nursing home services accounted for approximately $70 billion or 8 percent of the total health care expenditures in the United States in 1993 (Levit et al., 1994). The increase in nursing home expenditures was 6.3 percent between 1992 and 1993. Government comprises the largest payer of nursing home care. The Medicaid program paid for an estimated 52 percent of all the nation's nursing home expenditures in 1993 according to HCFA actuaries (Levit et al., 1994). (See Table 5.) Medicare paid for 9 percent and other government sources paid 2 percent of the total costs (Levit et al., 1994). Thirty-three percent was paid for directly out-of-pocket by consumers and 4 percent by private insurance and other private sources.

TABLE 5 National Expenditures by Source for Nursing Facilities, United States, 1993

 

Percent of Total Expenditures for Nursing Facilities ($69.6 billion)

Medicaid

52

Medicare

9

Other public

2

Private insurance

4

Out-of-pocket

33

 

SOURCE: Levit et al., 1994.

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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TABLE 6 State Medicaid Nursing Facility Reimbursement Methods and Rates, United States, 1979 and 1993

Reimbursement Methods and Rates

1979

1993

Retrospective

13

1

Prospective

 

 

Facility specific

16

17

Class

4

3

Combination

17

30

Total

50

51

Case-mix methods

3

19

Average Medicaid per diem rate

$28

$75

 

SOURCE: Swan et al., 1994.

Medicaid days of care were estimated to be 73.7 percent of the total freestanding nursing facility days of care, but Medicaid was estimated to pay for 55 percent of total free-standing facility expenditures in 1992 (HCIA and Arthur Andersen, 1994). Medicaid payments are lower than days of care because some Medicaid residents pay for a proportion of their care (under the state Medicaid spend-down requirements) and because private pay and Medicare payment rates are generally higher than Medicaid rates.

In 1993, the average Medicaid rate across states was $79.50 per day, which was about 4 percent higher than for 1992 (Swan et al., 1994). (See Table 6.) The national mean of 1993 rates, adjusted for the consumer price index, was unchanged from the previous year ($52.30 in 1993 compared to $52.16 in 1992). This increase is lower than in the 1989 to 1992 period, when rates were rising about 6 percent per year above inflation. It is also lower than the 1980 to 1989 period, when rate increases were approximately 2 percent per year above inflation. (Swan et al., 1994). Medicaid nursing home reimbursement rates vary widely across states in response to the varying methodologies used by states. Reimbursement rates increased on average about 4 percent between fiscal years 1992 and 1993, but when rates were adjusted for inflation they remained stable during that period. Thus, state Medicaid programs are bringing down the increases in reimbursement rates.

HCIA and Arthur Andersen (1994) reported a median net patient revenue of $67 per resident day for all free-standing nursing facilities in the United States in 1992 (total revenues divided by total resident days). The median total operating expenses per resident day was reported at $66.50. Revenues and expenses varied

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

by the size of facility, the type of ownership, and other factors. Direct patient care costs were 35 percent of total expenses for all free-standing nursing facilities in the United States (HCIA and Arthur Andersen, 1994). These direct costs include nursing care, supervision, charting, and other resident services. Indirect patient care costs (laundry, housekeeping, dietary, and other costs) were reported to be 17 percent of total expenses, administrative and general costs were 28 percent, depreciation and interest were 9 percent, and ancillary costs were 2.5 percent in 1992. The increase in administrative costs and general expense was the largest of any of the 5 cost components (30 percent between 1990 and 1992) (HCIA and Arthur Andersen, 1994). These dramatic increases in administrative costs were not explained. Administrative and general expenses include telephone, billing, maintenance and repairs, operation of plant, personnel, employee benefits, and medical records. The current distribution of resources for nursing home should be evaluated to determine the extent to which is may contribute to poor quality of care in some facilities.

Medicaid Reimbursement

The rapidly increasing cost of nursing home care has been a major concern to state policymakers, especially because nursing facilities consumed 32 percent of the Medicaid budget in 1993 (Levit et al., 1994). Many state Medicaid programs have attempted to control the growth in nursing home reimbursement rates (Holahan and Cohen, 1987; Bishop, 1988; Nyman, 1988a; Holahan et al., 1993; Swan et al., 1993a,c). States have considerable discretion in developing Medicaid reimbursement methods and rates.

Until 1980, states were required to pay for Medicaid nursing home services on the basis of "reasonable costs" so that many states used retrospective reimbursement systems, paying the costs of care (GAO, 1986). The Omnibus Budget Reconciliation Act of 1980 gave states greater flexibility in developing reimbursement systems. This provision, known as the Boren amendment, allowed states to pay nursing facilities based upon what was "reasonable and adequate to meet the costs incurred by efficiently and economically operated nursing facilities in providing care." States began to change their reimbursement systems to gain greater control over costs.

Since 1980, there has been a pronounced shift away from retrospective reimbursement (one state in 1993) to prospective facility-specific methods (17 states in 1993) or combination or adjusted systems (30 states) (Swan et al., 1993a,c; Swan et al., 1994). (See Table 6.) Three states continued to use prospective class (or flat) rate systems in 1993. In addition, there has been a substantial increase in numbers of states with case-mix reimbursement (19 case-mix states in 1993). Four states were participating in the HCFA Case-Mix Demonstration project and two other states were implementing their case-mix systems in 1994 and 1995. Thus, by 1996, about half of all state Medicaid programs will be using case-mix

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

reimbursement. (Swan et al., 1994). Most states included some ancillaries in their basic reimbursement rates, such as therapy services and prescription drugs. Capital reimbursement was largely based on historic costs (Swan et al., 1994). Medicaid nursing home per diem rates were the outcome of state reimbursement methods. Medicaid nursing home reimbursement rates varied widely across states in response to the varying methodologies used by states. In summary, state Medicaid reimbursement methods for nursing facilities are gradually changing to facility-specific methods and case-mix reimbursement systems.

Impact of Prospective Payment Systems

Several studies have been conducted to examine the effects of Medicaid payment systems for nursing facilities. Retrospective reimbursement has been widely criticized as resulting in higher costs and promoting inefficiency (Holahan and Cohen, 1987). Like retrospective systems, prospective systems with weak efficiency incentives, generous inflation adjustments, and low ceilings can have limited cost controls (Holahan, 1985). Most studies have found that prospective reimbursement systems lower Medicaid costs over retrospective systems (Ullmann, 1984; Swan et al., 1988, 1993c, 1994; Buchanan et al., 1991; Ohsfeldt et al., 1991; Coburn et al., 1993). The strong trend toward the conversion of Medicaid prospective systems reflects the noncontroversial nature of the cost savings findings.

Even though prospective payment systems control costs, a number of researchers have identified negative consequences of cost containment for access and quality, especially for Medicaid patients. In the long run, these may result in lower quality of care and fewer services provided to Medicaid recipients (Swan et al., 1988, 1993a,c; Buchanan et al., 1991; Coburn, et al., 1993). Lee and colleagues (1983) found that cost controls on nursing home rates appeared to have a negative impact on the access of public patients to nursing home care and also to result in reductions in service intensity and possibly in the quality of care. In Maine, after prospective payment was adopted by Medicaid, a decline in the Medicaid share of patient days occurred following the introduction of prospective payment (Coburn et al., 1993). Thus, the special incentives for increasing Medicaid's share of patients were ineffective in Maine. The findings also raised concerns about the financial viability over time of some facilities under prospective payment (Coburn et al., 1993).

Using a sample of 2,460 skilled nursing facilities in 1981, Cohen and Dubay (1990) also found that state Medicaid programs under prospective and flat rate systems are able to control costs, but these systems create access and quality problems. Facilities with these systems indicated they had less debilitated patients and some facilities reduced their staffing, which could lead to quality problems. They found that when reimbursement rates were lowered, nursing facilities responded by decreasing their resident case-mix and reducing staffing

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

beyond the apparently appropriate level for the given case-mix (Cohen and Dubay, 1990).

Nyman (1988b) found that nursing facilities in Iowa with more private pay residents provided better quality of care (as measured by the number of deficiencies). Gertler (1989) also found a relationship between higher proportions of Medicaid patients and poorer quality of nursing home care. An increase in Medicaid reimbursement does increase access for Medicaid recipients, but this in turn lowers the quality of care (as measured by the nursing hours of care (Gertler, 1989). Spector and Takada (1991) were able to confirm that facilities with a low percentage of private residents were associated with poorer outcomes of care. Thus, a higher percentage of Medicare or private pay patients may be positively associated with higher quality and a higher percentage of Medicaid patients is negatively associated with higher quality of care (Nyman, 1988b, 1989a; Davis, 1993).

Hospital-based facilities with Medicare certification receive higher reimbursements than Medicaid facilities (Dor, 1989). Such facilities may have higher quality of care because they have higher staffing levels. Having accreditation may be positively associated with higher staffing levels and with higher quality of care. The existence of dedicated special care units, such as those for persons with Alzheimer's disease, may also be associated with higher quality of care because of higher staffing levels. Large size facilities may also be associated with higher quality although findings are mixed (Ullmann, 1981; Nyman, 1988b; Davis, 1991).

Regional variation can also impact on quality. Nyman (1988a) found that markets in Wisconsin with limited bed supply had less Medicaid reimbursement spent on patient care while the reverse was true when there was an excess supply. Higher quality for nursing facilities in Wisconsin was found in areas with greater competition for patients (Nyman, 1989b). Davis (1993) found that nursing home costs are lower in markets where beds are owned by fewer firms (less competitive markets) and higher in markets with more empty beds. In the same study in Kentucky, he found that for-profit facilities have lower costs and tend to operate in counties with higher market consideration. Ray and colleagues (1987) showed wide variations in the type of nursing home residents and their turnover rates across three states. Thus, the wide state variations in reimbursement methods and rates create major differences in facility revenues and the quality of care (Nyman, 1989a,b).

Policy Changes for Medicaid Reimbursement Policies

Many analysts have recommended that operating costs related to resident care should be separated from and treated differently than nonresident care costs (Holahan and Cohen, 1987; Lewin/ICF, 1991). These experts have strongly recommended that reimbursement controls on direct patient care costs should be

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

minimal or nonexistent in order to encourage homes to maintain or expand care need in order to promote access and appropriate services for heavy-care patients. They recommended that strong efficiency incentives for cost containment should be placed on non-care-related operating costs. Efficiency incentives can allow nursing facilities to keep all or some of the difference between actual costs of care and a ceiling or target rate (Holahan, 1985; Holahan and Cohen, 1987).

Many states do not appear to be using this approach. Where limits on nursing are set at the minimum nursing staffing levels and average wages, this could encourage reductions in staffing rather than improvements in staffing. A survey of state Medicaid reimbursement methods in 1988 found that 23 states had ceilings imposed on administrative costs, 10 on profit rates, and 10 on capital reimbursement (Swan et al., 1993c). On the other hand, many states (19 states in 1988) used ceilings on nursing costs (Swan et al., 1993c). In a survey of 1993 Medicaid methods, 30 states reported using cost center limits for nursing or patient care costs and 18 had limits on general operating costs. Cost ceilings for direct patient care costs could have negative consequences for the staffing levels in nursing facilities and for quality of care (Swan et al., 1994). Some state reimbursement methods and rates may be more reflective of state budget resources than tied to the actual costs of providing nursing home care (Swan et al., 1993c). State reimbursement policies that discourage appropriate staffing levels should be reconsidered. Ceilings on direct resident care expenditures could have a negative impact on both staffing levels and quality of care. Most state reimbursement systems do not provide incentives to improve the quality of direct patient care.

The General Accounting Office (GAO, 1986) reviewed the state Medicaid reimbursement methods used by states for nursing facilities. This study concluded that HCFA had not established adequate guidelines for states and recommended a number of nursing home reimbursement changes that would ensure that states: disallow certain costs such as those for luxury items, use audited cost reports for computing rates, use inflation indices that reflect nursing facilities costs, perform more studies on subgroups of facilities and ceilings, do not use returns on equity for proprietary nursing facilities except in shortage areas, and limit sales and leases on property costs (GAO, 1986). It is not known to what extent these problems have been corrected. Continuing disputes between facilities and states over Medicaid reimbursement methods are shown by the many Boren amendment lawsuits filed by nursing facilities against state Medicaid agencies (Harrington et al., 1993; Weinberg et al., 1993). The varying state Medicaid reimbursement methods appear to be problematic, and may not ensure that the actual costs of providing direct resident care are covered.

Case-Mix Reimbursement

Case-mix reimbursement systems were developed for Medicaid as a means

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

of making closer linkages between resident needs, payments, and costs and as a way for removing access barriers for heavy-care Medicaid patients (Schlenker et al., 1985; Schlenker, 1991a,b). As noted above, 19 states were using case-mix systems in 1993 (Swan et al., 1994). The most commonly used case-mix measure has been functional status (using Activities of Daily Living or ADL) although other disability scales have been used (Weissert and Musliner, 1992a,b). One of the best known approaches has been the RUGS methodology developed by Fries and Cooney (1985). This approach has been updated into a RUG-II and now a RUG-III version (Fries et al., 1994). Resident characteristics are typically examined for the amount of personnel resources needed to provide care to residents, which can be determined in different ways such as staff time and cost studies (Weissert et al., 1983; Fries and Cooney, 1985; Arling et al., 1987, 1989; Fries et al., 1989, 1994). Once costs are determined, they are tied to resident characteristics (Weissert and Musliner, 1992a,b). As Fries and colleagues (1994) pointed out, the development of classification systems and resource use groups is primarily a technical process, but the development and assignment of reimbursement categories is primarily a political process.

Several studies have been conducted of case-mix (Weissert et al., 1983; Cameron, 1985; Fries and Cooney, 1985; Arling et al., 1987, 1989; Schneider et al., 1988; Fries et al., 1994). Weissert and Musliner (1992a,b) have summarized the results of the many studies of case-mix reimbursement. These studies reported that most states that have used case-mix reimbursement have improved access for some heavy care residents (Ohio, Illinois, Maryland, and New York). On the other hand, there continued to be problems with access in some case-mix reimbursement states such as West Virginia (Holahan, 1984; Butler and Schlenker, 1988; Weissert and Musliner, 1992a,b). Access problems under case-mix have especially occurred in areas where there is a low supply of beds (Nyman, 1988b), where there are Medicaid processing delays (Weissert and Cready, 1988), and where reimbursement rates are low. Access problems occurred for those with low care needs and where community-based alternatives were not necessarily available (Butler and Schlenker, 1988; Feder and Scanlon, 1989).

In terms of the issue of costs, Weissert and Musliner (1992a,b) argued that case-mix may have distributed payments equitably among nursing facilities such as in New York. On the other hand, administrative costs tended to increase (Ohio costs tripled and Minnesota costs doubled) or remain neutral (e.g., Maryland and New York) depending on the system (Weissert and Musliner, 1992a,b).

Quality is a key issue with case-mix systems. For example, Weissert and Musliner (1992a,b) pointed out that New York and Minnesota payments for improved resident functioning did not produce an increase in restorative care. Ohio payment incentives for therapeutic services did not increase those services but Illinois payments for increases in services were effective (Butler and Schlenker, 1988). They also pointed out that when Maryland paid for extra turning and positioning services and Illinois paid for decubitus prevention, resi-

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

dents improvements did occur (Schlenker et al., 1988). On the other hand, higher payments for more care can lead to perverse incentives such as the extra payments in West Virginia for catheterized patients that resulted in increased urinary catheterization rates (Schlenker et al., 1988) or increased tube feeding and oxygen use in Maryland (Feder and Scanlon, 1989). Thus, some case-mix systems may have negative impacts on quality, while those that pay for special care services may improve the amount of care provided.

Case-mix reimbursement generally has not led to increases in nursing staff ratios. In Maryland, there was no evidence that extra nursing home payments were used to add more staff (Feder and Scanlon, 1989). New York also did not increase staff even though resident case-mix increased (Butler and Schlenker, 1988). Although West Virginia had some evidence of poor quality (e.g., increased catheterization), nursing resources did increase in the 1979 to 1981 period (Holahan and Cohen, 1987; Weissert and Musliner, 1992a,b). In the San Diego experiment where facilities were given financial incentives to take more heavy care residents, there was no evidence that extra payments were spent on extra care (Meiners et al., 1985). Of the six states systems reviewed by Weissert and Musliner (1992a,b), only Illinois was rated as having improved quality (Holahan, 1984; Butler and Schlenker, 1988).

HCFA is undertaking a demonstration project to introduce Medicaid case-mix in four states in 1994 to 1995. As Weissert and Musliner (1992b) have noted, it is not clear whether substantial new advances will be made in designing improved case-mix reimbursement systems in the demonstration project. An evaluation has been planned that will examine the outcomes of the demonstration on access, quality, and costs.

In summary, the support for case-mix reimbursement is mixed and has not been shown to improve quality. Weissert and Musliner (1992a,b) have concluded that the introduction of case-mix reimbursement may increase costs and will not improve quality. Case-mix reimbursement, therefore, may not increase the level of staffing or quality in nursing facilities unless new features are added to these Medicaid methodologies. New case-mix systems may be able to ensure that appropriate staffing levels are maintained and improved and that quality of care is maintained or enhanced.

Medicare Reimbursement

Medicare retrospective payments methods based on reasonable costs have been widely criticized as inflationary (Schieber et al., 1986; Holahan and Sulvetta, 1989). From 1982 to 1985, Congress made some minor changes in the nursing facility reimbursement methods to expand Medicare participation and to control costs (Schieber et al., 1986). One major advantage of Medicare reimbursement for nursing facilities is that its methodology is uniform across states and regions, unlike Medicaid reimbursement methods. Nevertheless, many nursing facilities

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

have been reluctant to admit Medicare patients because of their traditionally higher costs and the low volume of residents eligible for such care. Staffing requirements for Medicare certified facilities are higher and residents must meet stringent need requirements under Medicare rules. Dor (1989) showed that Medicare-specific marginal costs were generally well above average Medicare long-term-care reimbursement rates. Thus, Medicare reimbursements are more attractive to long-term-care facilities that specialize in providing such care in order to gain economies of scale and scope (Dor, 1989).

Because prospective reimbursement systems have been shown to reduce costs, this approach is under consideration by HCFA. Congress has mandated that Medicare study prospective reimbursement as a means of controlling nursing facility costs. In response to Congress, HCFA is conducting a demonstration project to study prospective case-mix reimbursement for Medicare and for participating state Medicaid programs. If these new systems are adopted, Medicare may have some of the same problems that have resulted from the Medicaid prospective payment systems and case-mix reimbursement for nursing facilities. Other options could be developed for Medicare to address the goals of controlling costs while increasing access, providing care to resource-intensive residents, and improving quality (Holahan and Sulvetta, 1989; Weissert and Musliner, 1992a,b). Moreover, greater coordination is needed between the Medicare and Medicaid reimbursement policies and rates.

Ownership Structure and Profits

The majority of nursing facilities are proprietary and facilities are increasingly owned by investors. Of the total nursing facilities, 71 percent were reported as proprietary, 24 percent were nonprofit, and 5 percent were government owned in 1991 (Sirrocco, 1994). Although facilities can be classified by ownership, corporate goals differ within these ownership categories. Although nonprofit facilities generally have charitable goals, some nonprofit facilities may seek to maximize revenues. Proprietary facilities generally are oriented to maximizing profits and an increasing number of these facilities are publicly traded corporations.

Nursing facilities, like other segments of the health industry, are consolidating into large health care organizations. In 1984, there were 2,039 facilities and 234,478 beds owned or operated by investor-owned chains (Punch, 1985). Thus, 16 percent of the total beds were investor-owned (DuNah et al., 1995). In 1991, a survey identified 207 long-term-care systems that operated 4,073 facilities and 478,918 beds (Burns, 1992). This group had increased facilities by 3.7 percent and beds by 4.4 percent over the previous year. Of this group, 44 were Roman Catholic providers (23,973 beds) and 8 were public chains (3,154 beds). The largest chain was Beverly Enterprises, which reported 90,228 beds in 1991, and Hillhaven, which was second with 44,681 beds. The largest chains were report-

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

ing rapid growth although Beverly Enterprises and Hillhaven had both reduced their facilities and beds slightly over 1990. Thus, the chains had about 28 percent of the facilities and 29 percent of the total beds in 1991 (Burns, 1992). In contrast, the OSCAR system indicated that 48 percent of certified facilities surveyed in the calendar year of 1993 were chain facilities (Harrington et al., 1995).

HCIA and Arthur Andersen (1994) reported that 23 of the largest 25 nursing home chains in the United States were involved in acquisitions during 1993. They also reported that chains represent 34.5 percent of the total market and that the largest 20 chains operate 18 percent of the total beds. In addition, they reported that 16 nursing home companies have become public in the past 2 years, which gives these companies new sources of capital for growth and acquisitions.

Profit Margins

Profit margins reported for the nursing home industry have generally been good. Beverly Enterprises, the largest nursing home chain, reported revenue increases of 9 percent between 1990 and 1991 to $2.3 billion. Net income rose 126 percent to $29 million for 1991 over 1990 (1 percent profit) (Burns, 1992). Hillhaven, the second largest chain, had a net loss in 1991 of $7.3 million on revenues of $1.1 billion. Manor Care, the third largest nursing home chain, reported a net income of $71 million on $666 million in revenues (11 percent profit) (Burns, 1992; Abelson, 1993).

A 1991 study of profits in New York found that the average profit margin on facilities was 3 to 7 percent and the return on investment ranged from 15 to 26 percent. Less than 50 percent of the nonprofit facilities and 33 percent of the public facilities were reporting profits, so that most profits were made by proprietary facilities. At the same time, owners and their family members frequently received salaries from the facilities. In 1992, 8 facilities reported between $1 to $2 million in salaries to owners or family members (Rudder, 1994).

The total profit margin for the free-standing nursing home industry (calculated as the difference between total net revenue and total expenses divided by total net revenues reported from facility cost reports) was reported at 3.7 percent for 1992 (HCIA and Arthur Andersen, 1994). Profit margins were reported to have increased by 30 percent between 1990 and 1992. Profit margins were higher in investor-owned and system-affiliated facilities (4.15 percent in 1992) than in other types of facilities and in medium-sized facilities as compared to small facilities.

In 1994, Manor Care had a 18 percent return on equity for the latest 12 months and sales growth of 14 percent on $1.2 billion in revenue. (See Table 7.) The earnings per share increased by 16.5 percent and the profit margin was 6.9 percent. Hillhaven had a 25 percent return on equity for the latest 12 months and a 4 percent increase in sales growth on its $1.5 billion in revenues with a 4.2 percent profit margin (Walsh, 1995). Beverly Enterprises had a 9.6 return on

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

equity for the past year and a sales growth of 4 percent on its $2.9 billion in revenues. Its overall profit margin was 2.5 percent for the year. National Medical had a deficit on return on equity over the past year and 5-year period. Health Care and Retirement Corporation had 12 percent return on equity and a 6.7 percent profit margin the past year. Real estate investment trusts are growing in importance for the ownership and operation of long-term-care facilities (Bowe, 1994). Health Trust is an organization with income-producing real estate. This corporation had a return on equity of 24.5 percent and a profit margin of 5.8 percent during the past year (See Table 7.)

Forbes reported that the all-industry medians for return on equity for 1 year was 12.6 percent and for 5 years was 11.4 percent in 1994 (Kichen, 1995). (See Table 7.) Manor Care, Health Trust, and Hillhaven exceeded the all-industry medians while Beverly was slightly lower. The all-industry profit margin for previous 12 months was 4.3 percent. Manor Care, Health Care and Retirement, and Health Trust exceeded the all-industry medians for-profit margin, Hillhaven was similar to the national industry medians, while Beverly fell below. Thus, most of these long-term-care firms were generally continuing to be profitable and some exceeded both the health medians and the all-industry medians for-profitability (Walsh, 1995). The health care industry ranked first out of 21 industry groups for its 5-year return on equity.

Profit-making issues are complex and can not be fully developed in this paper. The issues of profits on investment, especially real estate investments, and hidden profits disguised as administrative or capital expenses must be more fully understood. Few studies of the industry have been conducted, especially studies that determine appropriate levels of expenditures for-profits, administrative costs, and capital.

Historically, proprietary health facilities were paid a return on equity on their investment under the Medicare program, equivalent to earnings on investments in specified government securities. In 1985, the Combined Omnibus Budget Reconciliation Act eliminated this provision for hospitals. The 1993 OBRA eliminated this provision for Medicare skilled nursing facilities. Some states have also attempted to limit profits under the Medicaid program. For example, 10 states reported setting maximum cost limits on Medicaid profits and 23 states reported cost center limits for Medicaid administrative costs in 1988 (Swan et al., 1993c). Other states have disallowed any Medicaid payments for-profits or return on equity. Payments for return on equity or profits for the Medicaid program and inadequate limits on administrative salaries and costs, especially to parties related to the owners, may be unnecessarily increasing Medicaid costs.

Ownership, Staffing, Costs, and Quality

Substantial differences in costs occur across facilities by ownership. Data for 1994 showed that nonprofit homes had the largest net patient revenue, prima-

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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TABLE 7 Profit Margins for the Nursing Home Industry, United States, 1994

 

Profitability (percent)

 

Return on Equity

Return on Capital

Company

5-Year Average

Latest 12 Months

Latest 12 Months

Debt/Capital

Beverly Enterprises

2.0

9.6

7.5

45.0

Health Care and Retirement

NA

12.2

8.7

28.2

Health Trust

23.2a

24.5

14.0

60.9

Hillhaven

13.0b

25.2

9.8

60.9

Manor Care

20.5

18.0

11.0

32.9

National Medical

Deficit

Deficit

Deficit

13.4

Health median

18.6

17.6

11.0

32.1

All industry median

11.4

12.6

9.4

32.8

NOTE: D–P, deficit to profit; P–D, profit to deficit; NM, not meaningful; NA, not applicable.

a 3-year average.

b 4-year average.

SOURCE: Walsh, 1995.

rily because they had a higher proportion of private pay residents compared with other facilities (HCIA and Arthur Andersen, 1994). Nonprofit facilities had significantly higher median operating expenses and higher expenditures on direct patient care. The typical investor-owned facility had lower net revenues, lower expenditures, and fewer expenditures on direct patient care. Nonprofit facilities had higher median administrative and general expenses than investor-owned facilities, where investor-owned facilities had higher expenditures for capital (HCIA and Arthur Andersen, 1994). These relationships to ownership and costs are consistent with other studies (Lee et al., 1983; Cohen and Dubay, 1990; Arling et al., 1991).

The relationship of facility ownership to staffing, costs, and quality has been the subject of numerous studies and controversy. One of the major debates is whether the proprietary nature of the nursing home industry affects process and outcomes in terms of quality of care. A review of the research studies on ownership and quality shows a mixed picture in terms of the relationship (Koetting, 1980; Greene and Monahan, 1981; O'Brien et al., 1983; Hawes and Phillips, 1986; Nyman et al., 1990; Davis, 1991). Some researchers have found no difference in quality based on ownership or whether the facility is part of a chain (Cohen and Dubay, 1990). Ullmann (1987) also found that profit-making facilities had consistently lower costs when controlling for quality ratings and case-mix.

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

Growth (percent)

Sales

Earning Per Share

5-Year Average

Latest 12 Months

5-Year Average

Latest 12 Months

Sales (in $ millions)

Net Income (in $ millions)

Profit Margin (percent)

7.3

3.9

NM

D–P

2,937

74

2.5

10.8

10.6

NA

22.4

602

40

6.7

10.4

24.4

38.2a

22.0

2,970

173

5.8

7.1

4.0

NM

31.1

1,470

62

4.2

13.2

14.4

30.0

16.5

1,200

83

6.9

-3.3

-20.5

NM

P–D

2,858

-320

Deficit

23.6

13.0

10.8

22.3

1,237

51

4.0

5.5

6.3

-18.8

11.8

1,449

60

4.3

Recently, Nyman (1988b) found that nonprofit nursing facilities in Iowa were associated with higher quality of care. Davis (1993) found that for-profit and chain facilities in Kentucky had lower operating costs and lower quality (as measured by a composite index of the likelihood rates for decubitus ulcers, catheterization, physical restraints, chemical restraints, and drug error rates) even though they also had higher ratios of RN per resident and lower overall staffing levels. Fottler and colleagues (1981) found an inverse relationship between profitability and patient care quality (as measured by staffing hours). Elwell (1984) also found a strong relationship between nonprofit and government ownership and higher staffing.

Using a quality-adjusted methodology, Gertler and Waldman (1994) found that for-profits were more efficient (lower costs), but nonprofits had higher quality (about 4 percent). The nonprofits had higher costs related to producing the higher quality. Thus, proprietary ownership and chain ownership have been associated with lower staffing levels and poorer process and outcome measures. Davis (1991), in a comprehensive review of the studies of ownership and quality, concluded that findings were mixed, but other studies with composite measures of quality seemed to indicate higher quality within nonprofit facilities.

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×
Reimbursement Policies and Quality Outcomes

Some studies have attempted to use reimbursement policies to provide incentives to improve quality in nursing facilities. Kane and colleagues (1983a,b), using a multidimensional approach to measuring quality of care from chart reviews, observations, and interviewer ratings, recommended that nursing facility outcomes be given incentive payments for high quality of care. Kane and colleagues (1983a) recommended that rewards could be based on aggregate outcomes for groups of facilities. Willemain (1980) also recommended quality outcomes incentives.

Nyman (1988b) argued that nurses are professionally trained and are motivated to meet professional standards. He found that incentive-oriented policies that are regulatory, such as requiring more professional nursing hours per patient day, would improve quality. Alternatively, the Medicaid reimbursement rate could be linked to the proportion of private patients in the home, in order to encourage quality competition for private pay patients. More research is needed on what incentives would be most effective.

Several states have experimented with quality-of-care incentives. The San Diego project, which provided incentives to take heavy care patients, did not result in more care being provided and provided no evidence that incentives improved outcomes (Weissert et al., 1983; Meiners et al., 1985). Connecticut developed a system that was later discontinued because the goals of the project were not obtained (Geron, 1991). A study of the Illinois quality incentive program (QUIP) found that positive incentives tied to reimbursement can result in improved patient care (Geron, 1991). The QUIP program distributed about $20 million in bonus payments in fiscal year 1989 to facilities that met any of six areas of quality improvement: structure and environment; resident participation and choice; community and family participation; resident satisfaction; care plans; and specialized intensive services. The facilities showed improvements in the measured areas, except that the resident satisfaction standard failed to discriminate among facilities. Unfortunately, the validity of the measures was not established (Geron, 1991). As noted above, the Maryland system of paying for facilities to turn and position patients to prevent decubitus ulcers and to pay for resident improvement in ADLs for 2 months have been rated as effective (Weissert and Musliner, 1992a,b). The effort in Michigan has not been evaluated (Lewin/ICF, 1991).

There are a number of difficulties in developing a model for financial incentives to improve quality outcomes. First, the complexities of defining, identifying, and measuring quality outcomes for individual residents are great (Chapin and Silloway, 1992). A second issue is determining which outcomes should be rewarded and how to weight these items based on perceived social value. Another issue is how to link the quality measures to payment (Chapin and Silloway,

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

1992). Another issue is the administrative costs of developing and managing this kind of system.

In a review of the use of reimbursement incentives for outcomes, Lewin/ICF (1991) concluded that this approach is yet not feasible because the technology to distinguish between outcomes attributable to ''facility effort" and other random factors or patient deterioration is not adequate. Another problem is that outcome-based incentives could have some negative consequences. Such incentive could encourage facilities to select patients who may improve rather than more chronic patients. There is a lack of consensus about which outcomes to reward (Lewin/ICF, 1991). Incentives for improved staffing for special activities (such as the turning project) could be beneficial, but such an approach could take a number of years to develop.

In spite of the difficulty of instituting reimbursement incentives for quality, reimbursement incentives could be directed toward increasing staffing levels and educating and training staff in nursing facilities. The positive relationship between quality and nurse staffing ratios, cited earlier, suggests that improved reimbursement incentives focused on this relationship may be effective.

Political Barriers to Regulation

Several barriers exist to increasing the staffing requirements in nursing facilities. The first and most important one is economic. Since government pays for 61 percent of current nursing home expenditures (Levit et al., 1994), Congress has been reluctant to increase the staffing requirements even though some Congressional representatives have been sympathetic to the need for increased staffing levels. The small staffing increases under OBRA 87 required substantial new resources. These small increases were apparently based on the amount legislators considered to be financially and politically feasible, because most of the costs for increased staffing would be reflected in increases in the federal and state Medicaid budgets. The fact that staffing levels were increased by Congress during the poor economic climate of the 1980s and while there was a large federal budget deficit reflected a Congressional recognition of the need for the increases.

Since OBRA 87 was passed, federal legislation has been considered by selected Congressional representatives for increased staffing beyond the OBRA requirements, but such legislation has not had the political support to proceed. States have the authority to increase their Medicaid payment rates as a means of increasing staffing standards, but the economic problems facing the states because of the growing Medicaid budget make it unlikely that states will initiate increases in nursing home staffing requirements.

A major barrier to increased staffing requirements is that nursing facilities have not always used state Medicaid rate increases to improve resident care. In the past, Medicaid rate increases were not used to increase staffing and presumably were used by some facilities to improve profitability (Feder and Scanlon,

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

1989; Weissert and Musliner, 1992b). Thus, some public officials are unwilling to support additional profit making. Current Medicaid and Medicare reimbursement allocations could be used to redistribute existing payments toward resident care.

Another problem is the historic opposition of the nursing home industry to regulation, which represents a major political obstacle to regulatory reform. Although the nursing home industry supports financial incentives for higher quality, their opposition to further regulation may stifle reform efforts. In the current economic and political environment, consumer and professional organizational pressures for reform may not have the political power to counter the opposition of the nursing home industry to new regulation.

Summary Findings And Discussion

The nursing home market is being strained by a growing demand for services. The greater acuity of illness and disability of individuals needing long-term care is placing new demands on providers of care. The supply of nursing facility beds has not kept pace with the growth in the oldest old population. This has resulted in nursing facilities being able to be somewhat selective in their admission practices and has limited the access to care of some individuals who may have the greatest need for services. The limited supply in some areas also appears to have a negative impact on the quality of nursing home care delivered in those areas.

There are a number of high quality nursing home facilities in the United States. These facilities have demonstrated that they can provide high quality of care even under the current economic constraints. On the other hand, the quality provided by nursing facilities is variable. In spite of increased regulatory efforts resulting from the implementation of the Nursing Home Reform Act in OBRA 87, there are still many problems with quality identified by state surveyors, residents and family members, ombudsmen, advocates, and researchers. Process measures for nursing home quality have been well developed and are used as a part of the nursing home survey process. Quality outcomes measures continue to be difficult to define and measure, especially for individuals with deteriorating conditions. Nevertheless, new data systems and outcomes measures have been developed and advances are being made in outcome measurement and monitoring.

Direct patient care and nurse staffing are critical structural factors that impact on both the process and the outcomes of care. Nursing staffing levels in nursing facilities are low compared to hospitals, and this is particularly the case in proprietary nursing facilities. Low salaries and benefits contribute to quality-of-care problems and high staff turnover rates. Low staff educational levels in nursing facilities are associated with low salaries. Inadequate nurse staffing levels have been shown to be a major factor in poor quality of nursing home care.

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

Economic factors are major forces shaping nursing home quality and staffing. The primary source of all nursing home revenues is Medicaid, so state Medicaid reimbursement policies have a major impact on the nursing home industry. As most states have adopted Medicaid prospective payment systems and strict methods for controlling costs, major problems with access and quality have developed. Moreover, many state methods specifically limit spending for direct resident care, which can have a negative impact on quality. Case-mix reimbursement systems that link payment to resident characteristics are being widely adopted by Medicaid programs and are under consideration by Medicare. Goals of these systems are to encourage facilities to improve access for heavy care residents and to design a more rational approach to payment. Evaluations of case-mix systems suggest that this approach will not improve quality and may not improve either access or cost controls. In fact, depending upon the design, such systems may encourage poorer quality of care and put unnecessary limits on staffing expenditures. Case-mix systems require careful monitoring to ensure that staffing levels and quality are maintained. New and improved reimbursement approaches that provide incentives to improve quality and staffing levels are needed.

Nursing home facilities are primarily private, profit-making organizations that are increasingly part of multiorganizational systems and investor-owned corporations. Consequently, nursing facilities are oriented toward increasing profits. Profit margins for the industry are generally good and historically have been increased by government policies that have paid for a return on equity. New policies have eliminated such payments for Medicare and some states are attempting to eliminate reimbursement, limit profit margins, or do both. Reimbursement policies that allow facilities to make profits by lowering staffing levels and quality of care are problematic.

The regulation of nursing facility quality may have improved since the implementation of OBRA 87. Nevertheless, regulatory efforts to assure quality need to be improved. One approach is to establish stricter minimum staffing standards and to develop guidelines for determining staffing levels that both facilities and regulators monitoring facility staffing can use. Another approach is to regulate how facilities allocate reimbursement resources to ensure that sufficient resources are directed to resident care and to limit excess profit taking and administrative costs. Another approach is to remove reimbursement limitations on nurse staffing expenditures, while controlling reimbursement for other cost areas such as profits, administration, and capital. Finally, reimbursement incentive systems are another way to encourage higher staffing levels and higher quality of care.

One problem with increasing staffing requirements is that the increased costs would fall primarily on the Medicaid and Medicare programs. Government officials have been reluctant to adopt new policies that will increase federal and state costs. In the current climate of federal deficits and stalled economic growth, such new policies would be feasible only if strict cost controls were placed on

Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
×

other components of nursing home costs. There is some evidence that limiting profits, administrative costs, and capital costs could achieve a savings that could shift funds to improve the quality of direct resident care.

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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Suggested Citation:"Nursing Facility Quality, Staffing, and Economic Issues." Institute of Medicine. 1996. Nursing Staff in Hospitals and Nursing Homes: Is It Adequate?. Washington, DC: The National Academies Press. doi: 10.17226/5151.
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Hospitals and nursing homes are responding to changes in the health care system by modifying staffing levels and the mix of nursing personnel. But do these changes endanger the quality of patient care? Do nursing staff suffer increased rates of injury, illness, or stress because of changing workplace demands? These questions are addressed in Nursing Staff in Hospitals and Nursing Homes, a thorough and authoritative look at today's health care system that also takes a long-term view of staffing needs for nursing as the nation moves into the next century. The committee draws fundamental conclusions about the evolving role of nurses in hospitals and nursing homes and presents recommendations about staffing decisions, nursing training, measurement of quality, reimbursement, and other areas. The volume also discusses work-related injuries, violence toward and abuse of nursing staffs, and stress among nursing personnel--and examines whether these problems are related to staffing levels. Included is a readable overview of the underlying trends in health care that have given rise to urgent questions about nurse staffing: population changes, budget pressures, and the introduction of new technologies. Nursing Staff in Hospitals and Nursing Homes provides a straightforward examination of complex and sensitive issues surround the role and value of nursing on our health care system.

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