1academyhealth, june 8-10 2008 changes in the relationship between nursing home financial...

11AcademyHealth, June 8-10 2008AcademyHealth, June 8-10 2008

Changes in the Relationship Between Nursing Home Financial Performance

and Quality of Care Under Public Reporting

Jeongyoung Park, Ph.D.Rachel M. Werner, MD. Ph.D.

University of Pennsylvania

Funded by AHRQ (R01-HS016478-01)


Improving quality of nursing home care is a national Improving quality of nursing home care is a national prioritypriority

Over the past decade, the US nursing home industry has Over the past decade, the US nursing home industry has experienced severe financial pressure experienced severe financial pressure

Improving quality involves substantial production costsImproving quality involves substantial production costs

Financial condition/stability becomes an important Financial condition/stability becomes an important consideration in explaining quality variationconsideration in explaining quality variation

BackgroundBackground


Prior ResearchPrior Research

Yet nature of the relationship between financial Yet nature of the relationship between financial performance and quality of care is not obviousperformance and quality of care is not obvious

Two conflicting expectationsTwo conflicting expectations

1.1. (-): Trade-off (Davis et al, 1998; O’Neil et al, 2003)(-): Trade-off (Davis et al, 1998; O’Neil et al, 2003) Profit-maximizationProfit-maximization

2.2. (+): Positive (Mukamel & Spector, 2000; Weech-(+): Positive (Mukamel & Spector, 2000; Weech-Maldonado et al, 2003)Maldonado et al, 2003) Market-wide change->more competitive Market-wide change->more competitive Market-based initiatives Market-based initiatives Product differentiation strategyProduct differentiation strategy


Market-based InitiativesMarket-based Initiatives

Recent move toward market-based quality initiativesRecent move toward market-based quality initiatives Quality report cardsQuality report cards

Nursing Home Compare (November, 2002)Nursing Home Compare (November, 2002) Reallocating demand from low to high quality facilitiesReallocating demand from low to high quality facilities Generating indirect financial consequences by changing Generating indirect financial consequences by changing

market sharesmarket shares Pay-for-performance (P4P)Pay-for-performance (P4P)

Currently in place or in planning stageCurrently in place or in planning stage Direct financial incentives for high performanceDirect financial incentives for high performance

Positive relationship between financial performance and Positive relationship between financial performance and quality will be stronger under new market and quality will be stronger under new market and regulatory conditionsregulatory conditions


Research Questions/HypothesesResearch Questions/Hypotheses

HHow do quality report cards affect the relationship ow do quality report cards affect the relationship between nursing home financial performance and quality between nursing home financial performance and quality of care?of care? H1: Facilities with high profit are more likely to provide better H1: Facilities with high profit are more likely to provide better

quality of care after public reportingquality of care after public reporting

To what extent is this relationship affected by facility or To what extent is this relationship affected by facility or market characteristics?market characteristics? H2: The extent of the impact is likely to be larger at for-profit H2: The extent of the impact is likely to be larger at for-profit

facilities after public reportingfacilities after public reporting H3: The extent of the impact is likely to be larger in more H3: The extent of the impact is likely to be larger in more

competitive markets after public reportingcompetitive markets after public reporting


DataData

Financial performanceFinancial performance Medicare Cost Report (MCR)Medicare Cost Report (MCR)

Quality and facility characteristicsQuality and facility characteristics Online Survey Certification and Reporting System (OSCAR) Online Survey Certification and Reporting System (OSCAR)

Limited to freestanding skilled nursing facilities (SNFs)Limited to freestanding skilled nursing facilities (SNFs) 9,444 SNFs with 75,400 observations9,444 SNFs with 75,400 observations FY 1997-2006 FY 1997-2006


MeasuresMeasures

Financial performanceFinancial performance Total profit margin t-1Total profit margin t-1 Total profit margin t-1 Total profit margin t-1 NHC NHC

Quality measures Quality measures Staffing: Total staff hours per resident day (HPRD)Staffing: Total staff hours per resident day (HPRD) Outcome: Incidence rate of pressure soresOutcome: Incidence rate of pressure sores Process: Incidence rate of restraint useProcess: Incidence rate of restraint use Total deficiency citationsTotal deficiency citations


Analytic StrategyAnalytic Strategy

Facility fixed-effects (FE) address omitted bias for time-Facility fixed-effects (FE) address omitted bias for time-invariant confoundersinvariant confounders

FE with instrumental variables approach (IV-FE) controls for FE with instrumental variables approach (IV-FE) controls for potential endogeneity of financial performance potential endogeneity of financial performance

Two-stage equation modelsTwo-stage equation models Profit = f(X, IV, fixed effects)Profit = f(X, IV, fixed effects) Quality = f(X, Profit, fixed effect)Quality = f(X, Profit, fixed effect)

Instrumental variables Instrumental variables CMS hospital wage index t-1CMS hospital wage index t-1 Total resident days t-1Total resident days t-1 Total resident days t-1 Total resident days t-1 NHC NHC


Descriptive ResultsDescriptive Results

For-profit: 72.2%For-profit: 72.2%

Nonprofit: 24.0%Nonprofit: 24.0%

Government: 3.8%Government: 3.8%

Chain: 61.0%Chain: 61.0%

Occupancy rate: 84.4%Occupancy rate: 84.4%

Total certified beds: 118Total certified beds: 118

% Medicaid: 65.0%% Medicaid: 65.0%

HHI: 0.27HHI: 0.27

Total profit margin t-1: 1.1%Total profit margin t-1: 1.1%

Total Staff HPRD: 2.97Total Staff HPRD: 2.97

Incidence rates of Incidence rates of Pressure sores: 3.67%Pressure sores: 3.67% Restraint use: 7.07%Restraint use: 7.07%

Deficiencies: 5.75Deficiencies: 5.75

Source: OSCAR and MCR (FY 1997-2006)


Results: Effect of Profit on QualityResults: Effect of Profit on Quality

IV-FEIV-FE

Pre-NHCPre-NHC Post-NHCPost-NHC

Total Staff HPRDTotal Staff HPRD -0.002-0.002(0.009)(0.009)

0.111**0.111**(0.022)(0.022)

[6.66min][6.66min]

Pressure SoresPressure Sores 0.041*0.041*(0.021)(0.021)

-0.149**-0.149**(0.055)(0.055)

Restraint UseRestraint Use 0.0060.006(0.050)(0.050)

0.382**0.382**(0.130)(0.130)

Deficiencies (IRR)Deficiencies (IRR) 0.992*0.992* 0.966**0.966**

IRR=Incidence Rate Ratios

**p<.01; *p<.05


Results: By OwnershipResults: By Ownership

For-profitFor-profit NonprofitNonprofit

Pre-NHCPre-NHC Post-NHCPost-NHC Pre-NHCPre-NHC Post-NHCPost-NHC

Total Staff HPRDTotal Staff HPRD 0.013**0.013**(0.004)(0.004)

[0.78min][0.78min]

0.074**0.074**(0.011)(0.011)

[4.44min][4.44min]

-0.014-0.014(0.049)(0.049)

0.0940.094(0.089)(0.089)

Pressure SoresPressure Sores 0.0160.016(0.012)(0.012)

-0.114**-0.114**(0.033)(0.033)

-0.024-0.024(0.209)(0.209)

0.1080.108(0.320)(0.320)

Restraint UseRestraint Use 0.0190.019(0.029)(0.029)

0.257**0.257**(0.073)(0.073)

0.8970.897(0.743)(0.743)

-0.816-0.816(1.232)(1.232)

Deficiencies (IRR)Deficiencies (IRR) 0.9970.997 0.954**0.954** 0.9920.992 0.9730.973


**p<.01; *p<.05


Results: By Market CompetitionResults: By Market Competition

More CompetitiveMore Competitive Less CompetitiveLess Competitive

Pre-NHCPre-NHC Post-NHCPost-NHC Pre-NHCPre-NHC Post-NHCPost-NHC

Total Staff HPRDTotal Staff HPRD -0.012-0.012(0.016)(0.016)

0.137**0.137**(0.041)(0.041)

[8.22min][8.22min]

0.017*0.017*(0.007)(0.007)

[1.02min][1.02min]

0.042**0.042**(0.011)(0.011)

[2.52min][2.52min]

Pressure SoresPressure Sores 0.0530.053(0.034)(0.034)

-0.189*-0.189*(0.088)(0.088)

0.0120.012(0.027)(0.027)

-0.003-0.003(0.040)(0.040)

Restraint UseRestraint Use -0.056-0.056(0.087)(0.087)

0.560*0.560*(0.221)(0.221)

0.0350.035(0.084)(0.084)

0.1380.138(0.114)(0.114)

Deficiencies (IRR)Deficiencies (IRR) 0.989*0.989* 0.967**0.967** 1.0071.007 0.9520.952


**p<.01; *p<.05


ConclusionsConclusions

Financial performance is an important determinant of the Financial performance is an important determinant of the delivery of high quality care in post-NHC perioddelivery of high quality care in post-NHC period

Variation in relationship existsVariation in relationship exists

Effects are statistically significant, but modest in size on Effects are statistically significant, but modest in size on averageaverage

However, the effects are likely to be larger when direct However, the effects are likely to be larger when direct financial payment is made for high quality performance financial payment is made for high quality performance (i.e., P4P)(i.e., P4P)


ImplicationImplication

Recent move toward wide-spread adoption of market-based Recent move toward wide-spread adoption of market-based quality improvement initiatives (i.e., NHC, P4P) may not quality improvement initiatives (i.e., NHC, P4P) may not substantially improve quality across all facilitiessubstantially improve quality across all facilities

P4P may worsen both financial and quality disparities, if P4P may worsen both financial and quality disparities, if

financial resources are necessary to achieve high quality of financial resources are necessary to achieve high quality of carecare

Proposed nursing home P4P should be carefully designed Proposed nursing home P4P should be carefully designed and managed and managed

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