Chain Reaction

Medicaid Nursing Facility Utilization

This study uses a longitudinal California data set (1995 to 2000) to address two concerns about Medicaid nursing facility (NF) utilization. First, to consider the impact of national cost-control policies, the authors analyze data trends in Medicaid NF participants, days of care, and expenditures. Second, the authors investigate the percentage of Medicaid days of care (%MDOC) using a panel regression model to consider resident, facility, and county market predictors. The findings show that although statewide Medicaid NF participants, expenditures, and%MDOC remain stable, Medicaid market segmentation persistes, with program participants distributed unevenly among facilities. Factors associated positively with facility%MDOC are the proportion of minority residents, a larger facility size, for-profit status, the percentage of aged Black persons in the county, and market concentration. The factors associated negatively with%MDOC are the percentages of resident men, residents aged 85 or older, residents with Alzheimer’s disease, Medicaid reimbursement rates, and county wealth.

Ownership Status and Length of Stay in Skilled Nursing Facilities

In 1998, Medicare implemented the Prospective Payment System for post-acute care provided by skilled nursing facilities. This system paid a fixed price per day above the cost of care, creating an incentive to provide longer length of stays to increase revenues. In this paper, we examine whether there are systematic differences in length of stay for post-acute care patients between for-profit and not-for-profit skilled nursing facilities. Based on the financial incentives inherent in the reimbursement system, we develop a conceptual framework that argues for-profits will provide a greater number of days of care to increase profits relative to not-for-profits. We find significant differences in length of stay by ownership, but once patient selection into a facility is accounted for using two-staged residual inclusion, there is no statistical differences in length of stay between for-profit and not-for-profit facilities.

Nursing home financial performance: the role of ownership and chain affiliation

BACKGROUND

The nursing home industry serves one of the most vulnerable populations, and its financial sustainability is a matter of public concern. However, limited empirical evidence exists on the impact of ownership and chain affiliation on nursing home financial performance.

PURPOSES

The aim of this study was to examine the joint effects of ownership and chain affiliation on the financial performance of the nursing home industry for the study period 1999-2004 on a national sample of 11,236 nursing homes per year.

METHODOLOGY/APPROACH

Data included the Medicare Cost Reports; the Online Survey, Certification, and Reporting file; and the Area Resource File. Dependent variables included operating and total margins. Independent variables included four ownership/chain affiliation combinations: for-profit chain, for-profit independent, not-for-profit chain, and not-for-profit independent. Random effects generalized least square regressions were performed.

FINDINGS

Results show that for-profit nursing homes delivered better financial performance than not-for-profit facilities did across both operating and total margins. However, the relationship between chain affiliation and financial performance was more nuanced. In the case of operating margin, chain-affiliated facilities delivered superior financial performance irrespective of ownership type; however, in the case of total margin, independents outperformed chain-affiliated facilities among for-profits.

PRACTICE IMPLICATIONS

Our findings show an interactive effect of ownership and chain affiliation on nursing home financial performance, suggesting the pursuit of different organizational strategies by different ownership/chain affiliation subgroups (for-profit chain, for-profit independent, not-for-profit chain, and not-for-profit independent), with implications for financial performance. For-profit independent nursing homes managed to be the top performing group in terms of overall financial despite the operating financial advantage of for-profit chain-affiliated nursing homes. Similarly, not-for-profit independent nursing homes and not-for-profit chain homes had comparable overall financial performance despite the operating financial advantage of chain homes.

Exploring the relationship between private equity ownership and nursing home performance: a review

Private equity has acquired multiple large nursing home chains within the past few years; by 2007, it owned 6 of the 10 largest chains. Despite widespread public and policy interest, evidence on the purported impact of private equity on nursing home performance is limited. In our review, we begin by briefly reviewing the organizational and environmental changes in the nursing home industry that facilitated private equity investments. We offer a conceptual framework to hypothesize the relationship between private equity ownership and nursing home performance. Finally, we offer a research agenda focused on the important parameters of nursing home performance: financial performance, and quality of care.

Factors associated with increasing nursing home closures

PURPOSE

We determine the rate of nursing home closures for 7 years (1999-2005) and examine internal (e.g., quality), organizational (e.g., chain membership), and external (e.g., competition) factors associated with these closures.

DESIGN AND METHOD

The names of the closed facilities and dates of closure from state regulators in all 50 states were obtained. This information was linked to the Online Survey, Certification, and Reporting data, which contains information on internal, organizational, and market factors for almost all nursing homes in the United States.

RESULTS

One thousand seven hundred and eighty-nine facilities closed over this time period (1999-2005). The average annual rate of closure was about 2 percent of facilities, but the rate of closure was found to be increasing. Nursing homes with higher rates of deficiency citations, hospital-based facilities, chain members, small bed size, and facilities located in markets with high levels of competition were more likely to close. High Medicaid occupancy rates were associated with a high likelihood of closure, especially for facilities with low Medicaid reimbursement rates.

IMPLICATIONS

As states actively debate about how to redistribute long-term care services/dollars, our findings show that they should be cognizant of the potential these decisions have for facilitating nursing home closures.

Determinants of performance failure in the nursing home industry

This study investigates the determinants of performance failure in U.S. nursing homes. The sample consisted of 91,168 surveys from 10,901 facilities included in the Online Survey Certification and Reporting system from 1996 to 2005. Failed performance was defined as termination from the Medicare and Medicaid programs. Determinants of performance failure were identified as core structural change (ownership change), peripheral change (related diversification), prior financial and quality of care performance, size and environmental shock (Medicaid case mix reimbursement and prospective payment system introduction). Additional control variables that could contribute to the likelihood of performance failure were included in a cross-sectional time series generalized estimating equation logistic regression model. Our results support the contention, derived from structural inertia theory, that where in an organization's structure change occurs determines whether it is adaptive or disruptive. In addition, while poor prior financial and quality performance and the introduction of case mix reimbursement increases the risk of failure, larger size is protective, decreasing the likelihood of performance failure.

Shareholder value and the performance of a large nursing home chain

OBJECTIVE

To analyze corporate governance arrangements and quality and financial performance outcomes among large multi-facility nursing home corporations (chains) that pursue stakeholder value (profit maximization) strategies.

STUDY DESIGN

To establish a foundation of knowledge about the focal phenomenon and processes, we conducted an historical (1993-2005) case study of one of the largest chains (Sun Healthcare Inc.) that triangulated qualitative and quantitative data sources.

DATA SOURCES

Two main sets of information were compared: (1) corporate sources including Sun's Security Exchange Commission (SEC) Form 10-K annual reports, industry financial reports, and the business press; and (2) external sources including, legal documents, press reports, and publicly available California facility cost reports and quality data.

PRINCIPAL FINDINGS

Shareholder value was pursued at Sun through three inter-linked strategies: (1) rapid growth through debt-financed mergers; (2) labor cost constraint through low nurse staffing levels; and (3) a model of corporate governance that views sanctions for fraud and poor quality as a cost of business.

CONCLUSIONS

Study findings and evidence from other large nursing home chains underscore calls from the Institute of Medicine and other bodies for extended oversight of the corporate governance and performance of large nursing home chains.

California nursing facility quality and union environments

OBJECTIVE

Many studies have examined quality effects of nursing facility (NF) staffing, but few have examined effects of unionization. Concerned with possible effects of unionization on quality, we analyzed unionization and local market climate of unionization, predicting both complaints (reflecting either quality problems or better monitoring and advocacy) and the substantiation of serious complaints (indicating major quality problems).

METHOD

Data were analyzed on California freestanding NFs in 1999 (N = 1,155). OLS regression was employed to predict both quality complaints and serious violations, the latter both controlling and not controlling for numbers of complaints.

RESULTS

Unionized NFs showed more complaints than did non-unionized NFs. Non-unionized NFs had more serious violations, particularly when the proportion of other county facilities unionized was higher.

DISCUSSION

These findings suggest that unionization enhances problem reporting while, especially in stronger union environments, reducing the incidence of serious quality violations.

Quality of care in nursing home organizations: Establishing a health services research agenda

Health services research has led to exciting new findings about the critical importance of the amount and type of nursing staff in nursing homes for improving the processes and outcomes of care. This paper reviews recent theoretical and research issues and outlines areas where research is needed. The nursing home research agenda for the future needs to concentrate on: (1) the relationship between structural measures of nursing (eg, staffing levels, education, turnover rates) and the outcomes and processes of care; (2) adequate processes of care and ways to improve the reliability of clinical outcome measures; (3) better ways to risk-adjust for resident characteristics; (4) the impact of nursing home characteristics (eg, ownership) and public policies (eg, reimbursement) on structural factors, processes, and outcomes; and (5) cost-effectiveness studies of nursing care at the organizational or system level.