Disparities in Nursing Home Quality

Researchers from Brown and Temple universities examined characteristics of the nation's 17,000 nursing homes to determine why the quality of some nursing homes is so much worse than that of others. The results of their efforts were published in the June 2004 issue of The Milbank Quarterly. Vincent Mor was the lead author. The Robert Wood Johnson Foundation was one of the study funders.

Q: Isn't it well known that nursing homes with large Medicaid populations have quality issues? What is unique about this study and its findings?

We put the issue of nursing home quality into a local geographic context. We found that quality is not randomly distributed across states, just as poverty is not randomly distributed across states. This is unique, because no one has ever found that part of the reason for differences in the quality of care in nursing homes is related to where those nursing homes are located. That, in turn, is related to the kinds of patients in those nursing homes in terms of their relative wealth, or ability to pay privately. And the availability of the extra resources associated with private pay patients, of course, is related to the quality of staff that can be recruited.

Q: Where do those poorer-quality, higher Medicaid population nursing homes exist?

They tend to be located in counties that are poorer, both in rural as well as urban areas. That makes sense when you think about it. People who are on Medicaid are poor. They may have become poor because they got sick, but it is somewhat more likely that they were poor to begin with. That means they're from neighborhoods where poor people live and are therefore going to nursing homes closest to where they were living.

Q: What made you decide to examine the issue of nursing home quality in this way?

It was a little bit by accident. We were examining what happens to nursing homes that have trouble keeping up as the market was transformed by the new demand for care of more Medicare and managed care patients.

African-Americans Dominate Poor Quality Nursing Homes

Q: What were some of the more profound or even surprising findings that came out of this research?

On reflection, the size of the racial concentration differences was kind of a surprise. Our study found that about 9 percent of all white nursing home residents are in lower-tier homes, compared to 40 percent of all African-American residents.

If you're an African-American, you're more than three times more likely to be in one of these poorer, lower-tiered nursing homes than if you're white.

Q: You also found high closure rates in these lower-tier homes. Did that surprise you?

We were somewhat surprised that the differences in terms of closure rates between high- and low-tier homes were as large as they were. Still, that makes sense because places with less money and fewer resources would have less ability to hire staff, so they'd be more likely to go out of business. Also, although we didn't report it in our paper, the change in ownership among low-tier homes is also pretty high. It's as if these homes, particularly privately owned, or proprietary, homes, are like hot potatoes.

Q: Although you found more deficiencies overall in low-tier homes, you also found more health-related deficiencies. Why do you think that is?

They go along with reduced staffing levels, particularly for the non-hospital based homes and for those who have long-stay residents.

Fewer Alternative Financial Sources Available

Q: You talk about the effect that having fewer opportunities to cross-subsidize a Medicaid population has had on these nursing homes. Can you explain what you mean by that?

Throughout the early 1990s, Medicare used a cost reimbursement approach for nursing facilities, in which it reimbursed actual accounting costs incurred. So if you were a nursing home and decided to invest in hiring the staff and buying the technology to serve ventilator patients, you could charge Medicare for the cost as long as 100 percent of those resources were devoted to the Medicare population. So many nursing homes participated in Medicare and made substantial investments in the early 1990s hoping to improve their payer mix and get more Medicare patients.

Q: And then they could use the Medicare funds to make up for the shortfall from the Medicaid patients?

Yes. That was a fairly well understood and acknowledged approach. As soon as prospective payment went into place in 1997, however, that was no longer possible. Now Medicare only pays a certain amount for a patient on a ventilator. If you're not efficient enough, or you don't have a large enough ventilator population, you have to make up the difference. There is no more cushion.

Q: And what happened on the managed care side?

Throughout the early 1990s, managed care grew dramatically in most medical markets across the country. So many nursing homes signed up with managed care companies. But they were referred hardly any patients because there's really not that much volume of post-acute care for the non-Medicare population. Even the volume that does exist tends to be somewhat healthier patients. So when there's a choice, the managed care plan would send patients to a home with a very high Medicare population, or even to a rehabilitation hospital or to home rehabilitation to save some money. So, it's as if these Medicaid nursing homes got all dressed up for the prom, but no one actually came to the door.

Q: How does the growth of assisted living facilities play into the whole picture?

The growth of home care and assisted living care is a major market phenomenon. What that meant for nursing homes was that the people they were serving were different for two reasons: By the time they got to the nursing home, they were sicker because they'd spent time getting care in the assisted living facility. And whether they were at home or in assisted living, they were consuming whatever wealth they might have had, so they were increasingly likely to be on Medicaid. Thus, there is less opportunity in any given market for cross subsidy of Medicaid patients by revenue from private pay patients. So the nursing homes began fighting over anyone who was private pay, and these patients usually went to the highest quality homes, if they knew how to choose them.

Diminishing Medicaid Payments

Q: So the end result, as you note, is nursing homes that are totally dependent on Medicaid. Yet because Medicaid payments may not even cover the cost of care, they can't provide quality care. Why don't the administrators and families lobby for a fair payment?

There was something called the Boren Amendment, which required that states pay a fair fee for nursing home care. Nursing homes could even take the state to court if they didn't think the reimbursement was fair. But states looked at this federal law as an unfunded mandate. Also, the Boren Amendment prevented states from pursuing more creative, alternative long-term care options, such as stimulating the development of home- and community based services. So the amendment was rescinded in 1997 as part of the Balanced Budget Amendment.

Q: Did that make payments worse?

No. We published a paper in the June 2004 Health Affairs that suggested that up until 2002, while most states slowed the rate of increase of the average Medicaid payments to nursing homes, very few pursued the worst care scenario, which was actually cutting payments.

Q: But what is happening now, given the tight state budgets over the past couple of years? As you note, the Kaiser Family Foundation finds that states are freezing or reducing Medicaid payments to cope with growing budget deficits.

We're in the field trying to collect data from states about what happened in 2003 and 2004—particularly because it looks like there has been a fairly substantial increase in the case mix severity of the average patient residing in a nursing home, meaning higher numbers of sicker patients.

Coordinated Approach Needed to Improve Quality

Q: You outline several possible solutions in your paper. One of them is to just let these low-tier facilities fail. Why isn't that a good option?

Nursing homes are a resource for a community; they're also a source of substantial employment. So if a nursing home is closed because it's so bad, then the community loses many jobs. Plus, the people who need the care have to go a much farther distance to be served, which means family members are put at substantial hardship to go visit their relatives. So the human cost of letting the market operate in situations where there are limited choices and consequences for the social viability of communities is substantial. That suggests this is a place where the government should step in.

Q. One option you discuss is that government "SWAT teams" composed of retired health executive volunteers be dispatched to "rescue" failing nursing homes. How realistic is that?

A SWAT team would go in and take over the nursing home by eminent domain, which many states have the authority to do if safety standards are being violated. The problem is that whoever takes over is still left with the limitations and financial consequences of the problems from the previous owners. There's usually substantial debt and few resources.

Q: So you're basically saying the SWAT team approach is too little too late?

A SWAT team approach is just one way is to go in and do something. The other way is that once a SWAT team is in place and the home needs to find a buyer, the government could provide some breaks, such as wiping out the home's debt, so the new buyers can start fresh. That takes flexibility and creativity and, the most difficult of all for state government, the willingness to make a mistake in one direction or the other.

Q: You also discuss increasing Medicaid reimbursement for nursing homes. Why isn't that a viable alternative?

That's a fairly inefficient alternative because the cost is really substantial. And it's not necessarily a bad thing that there continues to be some amount of cross subsidy among payers. It also might tie the state's hands if the state is fully engaged in keeping people at home by making discretionary investments in Medicaid home care programs or subsidized assistant living. However, other fiscal mechanisms are possible. For instance, one option is increasing the reimbursement rate for just those places with a very high Medicaid proportion and/or are in poor areas. Another is to direct that increased payments be used only for restricted purposes, such as additional staffing.

Q: How realistic is that option of targeted increases?

Congressman Patrick Kennedy's (D-RI) office is proposing some legislation predicated on a number of our recommendations. They've taken the concept of the lower-tier facilities and labeled them "underserved." Just as we have underserved geographic areas, homes identified as underserved could get some kind of loan forgiveness or some other kind of bonus. Professional staff working for a period of time in such facilities could benefit from educational loan forgiveness. I think that's a great idea: if you treat these places as underserved, they have the ability to draw on other resources that might give them the ability to get their heads above water. The same might be true for mentoring and training administrators, just as we train physicians through the public health service. So you pay for the administrator or nurse training if they agree to serve for a certain number of years in these lower-tier homes.

Q: You mention the risk pools for displaced residents. What do you mean by that?

What that means is that sometime, no matter what you do, the SWAT team can't turn around the home. So you have to close it down to reduce the risk to the individual patient. The problem now is what to do when a place closes, particularly for quality reasons. Today, states have the nasty job of trying to place frail residents quickly. And they almost always place them into another lower-tier facility because that's the one that has empty beds. So you end up saddling that next place with the same problem and putting the same individuals at risk again rather than saying, "Let's see if we can give a higher quality nursing home a premium for accepting these residents and have these patients go to a better quality place where there might be fewer empty beds."

Q: Are there other quality alternatives that you didn't address in your paper?

Yes. The Center for Medicare & Medicaid Services' (CMS) Quality Improvement Organizations (QIOs) have a major initiative to help nursing homes improve quality. But they primarily involve nursing homes that volunteer for the program. And virtually none of those homes are lower-tier homes. So you have relatively sophisticated quality improvement programs being instituted in homes that are already OK because they know enough to think the program is a great market draw and know how to apply for the program. What I'm now recommending is that the government set aside some significant portion of these quality improvement resources to try to really focus on improving and helping these lower-tier homes. The ones that won't volunteer. And that's the real challenge.

Q: In the end, you say: "Most Americans know little about nursing homes, have little interest in knowing more, and desperately want to avoid them." How do we change that?

I don't know that we will. Right now, people who can do so vote with their feet by paying for home care or buying into very luxurious assisted living facilities. Others hope they die in their sleep before anyone actually has to confront the fact they need to go to a nursing home. If people were really worried about going to a bad nursing home or having financial security in their future, they'd buy long-term care insurance and that would at least give them some guarantee that they'd be able to have some discretion as to which nursing home they go to. But long-term care insurance has not taken off, and who knows whether it will or not.

But I don't think people even see the quality differentiation among nursing homes. They just think they're all bad. The Kaiser Family Foundation did a survey a couple years ago about what people know about nursing homes. And it's pretty remarkable how adamant people were about not wanting to go a nursing home. A very high proportion of people said they'd rather be dead than go to a nursing home.