Ownership conversion and closure in the nursing home industry

Hospital-based skilled nursing facility survival: Organizational and market-level predictors

BACKGROUND

Rising health care costs and consequent increases in Medicare reimbursements have led to many payment reforms over the years. Implementation of the prospective payment system (PPS) for hospitals in 1983 incentivized hospitals to either purchase skilled nursing facilities (SNFs) or utilize their excess capacity to establish one within the hospital. With PPS reimbursement being applied to SNFs in 1998, prior monetary incentives for hospitals to own an SNF disappeared. However, despite the reduction in numbers, many hospitals continued to operate their hospital-based skilled nursing facilities (HBSNFs).

PURPOSE

This study examines the organizational and market-level factors associated with the survival of HBSNFs using the population ecology of organizations framework.

METHODOLOGY

Using American Hospital Association survey data, event histories of all U.S. acute care hospitals with an open HBSNF in 1998 were plotted to examine if a hospital closed its HBSNF during a 22-year period (1998-2020). The primary independent variables included hospital size, ownership, total margin, market competition, and Medicare Advantage penetration. The independent and control variables were lagged by 1 year. Cox regressions were conducted to estimate the hazard ratios capturing the risk of HBSNF closure.

RESULTS

The results showed that HBSNFs located in large, not-for-profit hospitals and those operating in less competitive markets had greater odds of surviving.

PRACTICE IMPLICATIONS

The HBSNF administrators of small, for-profit hospitals and those operating in highly competitive markets could utilize the findings of this study to judiciously allocate slack resources to their HBSNFs to keep those open given the current emphasis on continuity of care by regulatory bodies.

Medicare skilled nursing facilities' occupancy and payer source: The moderating role of financial performance

Objectives

While extensive research has focused on patient outcomes in skilled nursing facilities, a critical gap remains in understanding factors influencing their managerial performance, particularly occupancy rates. This study examines the occupancy rates of skilled nursing facilities and assesses the significance of two important drivers of managerial performance that have not received sufficient attention-the influence of payer mix and total profit margin. Specifically, we focused on the role played by a nursing home's financial performance (as assessed by profit margin) in influencing the relationship between payer mix and occupancy rate among skilled nursing facilities.

Methods

Data were extracted from the 2019 to 2020 Joint Annual Report of Nursing Homes for a sample of 612 skilled nursing facilities in Tennessee, USA. Regression analysis was performed by fitting a generalized estimating equation of occupancy rate.

Results

Compared to skilled nursing facilities in the lowest quartile of profit margin, for example, those in the highest quartile had approximately 18 percentage points higher occupancy rates per unit increase in resident days of care covered by traditional Medicare (β = 0.18, p = 0.0028). Similarly, skilled nursing facilities in the second highest quartile of profit margin had a higher occupancy rate by approximately 23 percentage points per unit increase in Medicare Advantage (β = 0.23, p = 0.0375) when compared to those in the lowest quartile of profit margin.

Conclusions

Skilled nursing facilities with stronger financial performance generally have higher occupancy rates, particularly notable in relation to an upswing in payer sources such as traditional Medicare and Medicare Advantage, when compared to skilled nursing facilities with weaker profitability. Given the increasingly larger role of Medicare in long-term care funding, policymakers and nursing home managers may find it useful to consider our findings when evaluating opportunities to enhance managerial performance of skilled nursing facilities.

Electronic Health Record Implementation Enhances Financial Performance in High Medicaid Nursing Homes

Introduction

The nursing home (NH) industry operates within a two-tiered system, wherein high Medicaid NHs which disproportionately serve marginalized populations, exhibit poorer quality of care and financial performance. Utilizing the resource-based view of the firm, this study aimed to investigate the association between electronic health record (EHR) implementation and financial performance in high Medicaid NHs. A positive correlation could allow high Medicaid NHs to leverage technology to enhance efficiency and financial health, thereby establishing a business case for EHR investments.

Methods

Data from 2017 to 2018 were sourced from mail surveys sent to the Director of Nursing in high Medicaid NHs (defined as having 85% or more Medicaid census, excluding facilities with over 10% private pay or 8% Medicare), and secondary sources like LTCFocus.org and Centers for Medicare & Medicaid Services cost reports. From the initial sample of 1,050 NHs, a 37% response rate was achieved (391 surveys). Propensity score inverse probability weighting was used to account for potential non-response bias. The independent variable, EHR Implementation Score (EIS), was calculated as the sum of scores across five EHR functionalities-administrative, documentation, order entry, results viewing, and clinical tools-and reflected the extent of electronic implementation. The dependent variable, total margin, represented NH financial performance. A multivariable linear regression model was used, adjusting for organizational and market-level control variables that may independently affect NH financial performance.

Results

Approximately 76% of high Medicaid NHs had implemented EHR either fully or partially (n = 391). The multivariable regression model revealed that a one-unit increase in EIS was associated with a 0.12% increase in the total margin (p = 0.05, CI: -0.00-0.25).

Conclusion

The findings highlight a potential business case -long-term financial returns for the initial investments required for EHR implementation. Nonetheless, policy interventions including subsidies may still be necessary to stimulate EHR implementation, particularly in high Medicaid NHs.

Quality effects of home acquisitions in residential aged care

OBJECTIVE

The recent consolidation of the Australian residential aged care market has raised concerns about the potential adverse effects of acquisition activity on quality of care (QoC). We examined changes in QoC outcomes within acquired homes and the influence of the acquiring providers' characteristics on these post-acquisition outcomes.

METHODS

A retrospective observational study was conducted using de-identified data sets obtained under the legal authority of the Royal Commission into Aged Care Quality and Safety. Regression analysis was used to investigate post-acquisition changes in QoC outcomes for 225 Australian home acquisitions between 2015 and 2019. The outcomes were analysed for the first two full financial years before and after the acquisition.

RESULTS

After controlling for other factors, we find acquired homes were associated with significantly worse QoC outcomes in the 2 years after acquisition, with higher rates of hospitalisations and reported complaints to the regulator. However, these results were driven by homes acquired by providers that were smaller in scale, for-profit or had comparatively poorer average quality across the other homes they operated.

CONCLUSIONS

Our finding that homes' QoC on average declines in the first 2 years following acquisition, are consistent with studies in other countries and points to the potential risks that consolidation poses to the care delivered to older people in Australia during that period.

High Medicaid Nursing Homes: Contextual Factors Associated with the Availability of Specialized Resources Required to Care for Obese Residents

Obesity is an increasingly important concern in the delivery of high-quality nursing home care. Obese nursing home residents require specialized equipment and resources. As high Medicaid nursing homes have limited financial ability, they may lack the necessary resources to address the needs of obese residents. Moreover, there are variations in the availability of obesity-related specialized resources across these facilities. This study aims to investigate the organizational and market factors associated with the availability of obesity-related specialized resources in high-Medicaid nursing homes. Survey and secondary data sources for the study period 2017-2018 were utilized. The survey data were merged with Brown University's Long Term Care Focus (LTCFocus), Nursing Home Compare, and Area Health Resource File datasets. The dependent variable was the composite score of obesity-related specialized resources, ranging from 0-19. An ordinary least square regression with propensity score weights (to adjust for potential survey non-response bias), along with appropriate organizational/market level control variables were used for our analysis. Our results suggest that payer-mix (>Medicare residents) and a higher proportion of obese residents were positively associated with the availability of obesity-related specialized resources. Policymakers should consider implementing incentives, such as increased Medicaid payments, to assist high Medicaid nursing homes in addressing the specific needs of obese residents.

Financial Performance is Associated With PPE Shortages in Chain-Affiliated Nursing Homes During the COVID-19 Pandemic: A Longitudinal Study

Many nursing homes operated at thin profit margins prior to the COVID-19 pandemic. This study examines the role of nursing homes' financial performance and chain affiliation in shortages of personal protection equipment (PPE) during the first year of the COVID-19 pandemic. We constructed a longitudinal file of 79 868 nursing home-week observations from 10 872 unique facilities. We found that a positive profit margin was associated with a 21.0% lower probability of reporting PPE shortages in chain-affiliated nursing homes, but not in non-chain nursing homes. Having adequate financial resources may help nursing homes address future emergencies, especially those affiliated with a multi-facility chain.

Factors Associated with Assisted Living Facility Closure

BACKGROUND AND OBJECTIVES

Assisted living facilities (ALFs) have experienced rapid growth in the past few decades. The expansion in the number of ALFs may cause markets to become oversaturated, and a greater risk of unprofitable ALFs to close. However, no studies have investigated ALF closure. This study adapted a model developed for the nursing home market for the ALF market to examine the organizational, internal, and external factors associated with closure.

RESEARCH DESIGN AND METHODS

Data on 1,939 ALFs operating in 2013 from Florida were used to estimate a logistic regression to examine the organizational, internal, and external factors that were associated with closure between 2013 and 2015.

RESULTS

During the two-year study period, 141 ALFs (7.3%) closed. Significant factors associated with increased odds of closure included fewer beds, not accepting Medicaid, and more deficiencies. Two factors (market concentration and population density) were marginally significant.

DISCUSSION AND IMPLICATIONS

The results of this study confirm the usefulness of a model that includes organizational, internal, and external factors to predict ALF closure. These outcomes highlight the concerns that closure can affect access to community based long-term care, especially for rural older adults, and indicate an expansion of Medicaid acceptance in ALFs could be protective against closure.

Determinants of Successful Nursing Home Accreditation

OBJECTIVES

This study examined the factors associated with better accreditation outcomes among nursing homes.

METHOD

A total of 538 nursing homes in Taiwan were included in this study. Measures included accreditation scores, external factors (household income, Herfindahl-Hirschman Index, old-age dependency ratio, population density, and number of older adult households), organizational factors (hospital-based status, chain-affiliated status, occupancy rate, the number of registered nurses or nurse aides per bed, and bed size), and internal factors (accountability, deficiencies, person-centered care, nursing skills, quality control, and integrated care).

RESULTS

Bed size, hospital-based status, accountability, deficiencies, person-centered care, nursing skills, quality control, and integrated care were found to predict accreditation.

CONCLUSION

Among all variables in this study, the quality indicators contributed to the most variation, followed by organizational factors. External environmental factors played a minor role in predicting accreditation. A focus on quality of care would benefit not only the residents of a nursing home but also facilitate its accreditation.

Does Living in a Higher Proportion Minority Facility Improve Quality of Life for Racial/Ethnic Minority Residents in Nursing Homes?

Background and Objectives

The proportion of racial/ethnic minority older adults in nursing homes (NHs) has increased dramatically and will surpass the proportion of white adults by 2030.Yet, little is known about minority groups’ experiences related to the quality of life (QOL). QOL is a person-centered measure, capturing multiple aspects of well-being. NH quality has been commonly measured using clinical care indicators, but there is growing recognition for the need to include QOL. This study examines the role of individual race/ethnicity, facility racial/ethnic composition, and the interaction of both for NH resident QOL.

Research Design and Methods

We used a unique state-level data set that includes self-reported QOL surveys with a random sample of long-stay Minnesota NH residents, using a multidimensional measure of QOL. These surveys were linked to resident clinical data from the Minimum Dataset 3.0 and facility-level characteristics. Minnesota is one of the two states in the nation that collects validated QOL measures, linked to data on resident and detailed facility characteristics. We used mixed-effects models, with random intercepts to model summary QOL score and individual domains.

Results

We identified significant racial disparities in NH resident QOL. Minority residents report significantly lower QOL scores than white residents, and NHs with higher proportion minority residents have significantly lower QOL scores. Minority residents have significantly lower adjusted QOL than white residents, whether they are in low- or high-minority facilities, indicating a remaining gap in individual care needs.

Discussion and Implications

The findings highlight system-level racial disparities in NH residents QOL, with residents who live in high-proportion minority NHs facing the greatest threats to their QOL. Efforts need to focus on reducing racial/ethnic disparities in QOL, including potential public reporting (similar to quality of care) and resources and attention to provision of culturally sensitive care in NHs to address residents’ unique needs.

Malpractice Environment vs Direct Litigation: What Drives Nursing Home Exit?

An ongoing concern about medical malpractice litigation is that it may induce provider exit, potentially affecting consumer welfare. The nursing home sector is subject to substantial litigation activity but remains generally understudied in terms of the effects of litigation, due perhaps to a paucity of readily available data. In this article, we estimate the association between litigation and nursing home exit (closure or change in ownership), separating the impact of malpractice environment from direct litigation. We use 2 main data sources for this study: Westlaw's Adverse Filings database (1997-2005) and Online Survey, Certification and Reporting data sets (1997-2005). We use probit models with state and year fixed effects to examine the relationship between litigation and the probability of nursing home closure or change in ownership with and without adjustment for malpractice environment. We examine the relationship on average and also stratify by profit status, chain membership, and market competition. We find that direct litigation against a nursing home has a nonsignificant effect on the probability of closure or change in ownership within the subsequent 2 years. In contrast, the broader malpractice environment has a significant effect on change in ownership, even for nursing homes that have not been sued, but not on closure. Effects are stronger among for-profit and chain facilities and those in more competitive markets. A high-risk malpractice environment is associated with change of ownership of nursing homes regardless of whether they have been directly sued, indicating that it is too blunt an instrument for weeding out low-quality nursing homes.

Nursing Home Quality and Financial Performance: Is There a Business Case for Quality?

This study examines the relationship between nursing home quality and financial performance to assess whether there is a business case for quality. Secondary data sources included the Online Survey Certification and Reporting (OSCAR), Certification and Survey Provider Enhanced Reporting (CASPER), Medicare Cost Reports, Minimum Data Set (MDS 2.0), Area Resource File (ARF), and LTCFocus for all free-standing, nongovernment nursing homes for 2000 to 2014. Data were analyzed using panel data linear regression with facility and year fixed effects. The dependent variable, financial performance, consisted of the operating margin. The independent variables comprised nursing home quality measures that capture the three dimensions of Donabedian's structure-process-outcomes framework: structure Registered Nurse (RN) hours per resident day, Licensed Practical Nurse (LPN) hours per resident day, Certified Nursing Assistant (CNA) hours per resident day, RN skill mix), process (facility-acquired restraints, facility-acquired catheters, pressure ulcer prevention, and restorative ambulation), and outcomes (facility-acquired contractures, facility-acquired pressure ulcers, hospitalizations per resident, rehospitalizations, and health deficiencies). Control variables included size, average acuity index, market competition, per capita income, and Medicare Advantage penetration rate. This study found that the operating margin was lower in nursing homes that reported higher LPN hours per resident day and higher RN skill mix (structure); higher use of catheters, lower pressure ulcer prevention, and lower restorative ambulation (process); and more residents with contractures, pressure ulcers, hospitalizations and health deficiencies (outcomes). The results suggest that there is a business case for quality, whereas nursing homes that have better processes and outcomes of care perform better financially.

High Medicaid Nursing Homes: Organizational and Market Factors Associated With Financial Performance

High Medicaid nursing homes (85% and higher of Medicaid residents) operate in resource-constrained environments. High Medicaid nursing homes (on average) have lower quality and poorer financial performance. However, there is significant variation in performance among high Medicaid nursing homes. The purpose of this study is to examine the organizational and market factors that may be associated with better financial performance among high Medicaid nursing homes. Data sources included Long-Term Care Focus (LTCFocus), Centers for Medicare and Medicaid Services' (CMS) Medicare Cost Reports, CMS Nursing Home Compare, and the Area Health Resource File (AHRF) for 2009-2015. There were approximately 1108 facilities with high Medicaid per year. The dependent variables are nursing homes operating and total margin. The independent variables included size, chain affiliation, occupancy rate, percent Medicare, market competition, and county socioeconomic status. Control variables included staffing variables, resident quality, for-profit status, acuity index, percent minorities in the facility, percent Medicaid residents, metropolitan area, and Medicare Advantage penetration. Data were analyzed using generalized estimating equations with state and year fixed effects. Results suggest that organizational and market slack resources are associated with performance differentials among high Medicaid nursing homes. Higher financial performing facilities are characterized as having nurse practitioners/physician assistants, more beds, higher occupancy rate, higher Medicare and Medicaid census, and being for-profit and located in less competitive markets. Higher levels of Registered Nurse (RN) skill mix result in lower financial performance in high Medicaid nursing homes. Policy and managerial implications of the study are discussed.

Competitive Spillovers and Regulatory Exploitation by Skilled Nursing Facilities

Typically, research on the effect of ownership has considered health care providers in isolation of competitive interaction from other firms. This analysis considers how the selection of Medicare reimbursement codes for skilled nursing facilities varies by ownership and is influenced by the competitive spillovers from market dominance of for-profit institutions. We find evidence that not-for-profits are less likely to code patients into the highest reimbursement categories. Further, as the market becomes dominated by for-profits, both for-profit and not-for-profits increase the share of patients in these high reimbursement categories.

The determinants of care home closure

This study investigates the causes of full closure of care homes in the English care home/nursing home market. We develop theoretical arguments about two causes for closure that are triggered by errors or external shocks: poor economic sustainability and regulatory action. Homes aiming to operate with lower quality in the market are argued for a number of reasons to be more susceptible to errors/shocks in setting quality, especially negative errors, leading to an empirical hypothesis that observed quality should negatively affect closure chance. In addition, given quality, homes facing relatively high levels of local competition should also have an increased chance of closure. We use a panel of care homes from 2008 and 2010 to examine factors affecting their closure status in subsequent years. We allow for the potential endogeneity of home quality and use multiple imputation to replace missing data. Results suggest that homes with comparatively higher quality and/or lower levels of competition have less chance of closure than other homes. We discuss that the results provide some support for the policy of regulators providing quality information to potential purchasers in the market.

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.

Private investment purchase and nursing home financial health

OBJECTIVE

To explore the impact of nursing home acquisition by private investment firms on nursing home costs, revenue, and overall financial health.

DATA SOURCES

Merged data from the Medicare Cost Reports and the Online Survey, Certification, and Reporting system for the period 1998-2010.

STUDY DESIGN

Regression specification incorporating facility and time fixed effects.

PRINCIPAL FINDINGS

We found little impact on the financial health of nursing homes following purchase by private investment companies. However, our findings did suggest that private investment firms acquired nursing home chains in good financial health, possibly to derive profit from the company's real estate holdings.

CONCLUSIONS

Private investment acquired facilities are an important feature of today's nursing home sector. Although we did not observe a negative impact on the financial health of nursing homes, this development raises important issues about ownership oversight and transparency for the entire nursing home sector.

Medicare skilled nursing facility reimbursement and upcoding

Post-acute care provided by skilled nursing facilities (SNFs) is reimbursed by Medicare under a prospective payment system using resource utilization groups (RUGs) that adjust payment intensity on the basis of predefined ranges of weekly therapy minutes provided and the functionality of the patient. Individual RUGs account for differences in the intensity of care provided, but there exists significant regional variation in the payments SNFs receive from Medicare due to the use of geographic adjustment factors. This paper is the first to use this geographic variation in the generosity of Medicare reimbursement to empirically test if SNFs respond to payment differences between RUG categories. The results are highly suggestive that SNFs upcode patients by providing additional therapy minutes to increase revenue, whereas we find no evidence of upcoding related to patient functionality scores. Simulating how different payment differentials affect RUG selection, we predict that reducing the financial incentive to upcode could result in significant savings to Medicare.

An instrumental variables approach to post-acute care nursing home quality: is there a dime's worth of evidence that continuing care retirement communities provide higher quality?

For the affluent elderly, continuing care retirement communities (CCRCs) have become a popular option for long term care and other health care needs related to aging. While CCRCs have experienced significant growth over the last few decades, very little is known about the quality of care CCRCs provide. This paper is the first to rigorously study CCRCs on a national scale and the only study that focuses on nursing home quality. Using a national sample from 2005, we determine if the quality of post-acute care provided by CCRC nursing homes is superior to traditional nursing homes. To mimic randomization of patients, instrumental variables analysis is used with relative distance as an exclusion restriction to handle the endogeneity of the type of facility where care is provided. After adjusting for endogeniety, we find that CCRC nursing homes provide post-acute care quality that is similar or lower to traditional nursing homes, depending on the quality measure.

The urban-rural disparity in nursing home quality indicators: the case of facility-acquired contractures

OBJECTIVE

To identify and quantify the sources of the urban-rural disparity in facility-acquired contracture rates in nursing homes.

DATA SOURCES

Survey inspection data of U.S. nursing homes from 1999 to 2008 and standardized national rural definition file from the Rural-Urban Commuting Area Codes.

STUDY DESIGN

We estimated regressions of facility-level contracture rate as a function of urban-rural categories (urban, micropolitan, small rural town, and isolated small rural town) and other related facility characteristics to identify size of the urban-rural disparity. We used Blinder-Oaxaca decomposition techniques to determine the extent to which the disparity is attributable to the differences in facility and aggregate resident characteristics.

PRINCIPAL FINDINGS

Rural nursing homes have higher contracture rates than urban nursing homes. About half of the urban-rural disparity is explained by differences in observable characteristics among urban and rural nursing homes. Differences in staffing levels explain less than 5 percent of the disparity, case-mix explains 6-8 percent, and structure and operational characteristics account for 10-22 percent of the disparity.

CONCLUSION

While a lower level and quality of staffing are a concern for rural nursing homes, facility structure and funding sources explain a larger proportion of the urban-rural disparity in the quality of care.

Response to regulatory stringency: the case of antipsychotic medication use in nursing homes

This paper studies the impact of regulatory stringency, as measured by the statewide deficiency citation rate over the past year, on the quality of care provided in a national sample of nursing homes from 2000 to 2005. The quality measure used is the proportion of residents who are using antipsychotic medication. Although the changing case-mix of nursing home residents accounts for some of the increase in the use of antipsychotics, we find that the use of antipsychotics by nursing homes is responsive to state regulatory enforcement in a manner consistent with the multitasking incentive problem. Specifically, the effect of the regulations is dependent on the degree of complementarity between the regulatory deficiency and the use of antipsychotics.

Geographic Market Definition: The Case of Medicare-Reimbursed Skilled Nursing Facility Care

Correct geographic market definition is important to study the impact of competition. In the nursing home industry, most studies use geopolitical boundaries to define markets. This paper uses the Minimum Data Set to generate an alternative market definition based on patient flows for Medicare skilled nursing facilities. These distances are regressed against a range of nursing home and area characteristics to determine what influences market size. We compared Herfindahl-Hirschman Indices based on county and resident-flow measures of geographic market definition. Evidence from this comparison suggests that using the county for the market definition is not appropriate across all states.

Staffing ratios and quality: an analysis of minimum direct care staffing requirements for nursing homes

OBJECTIVE

To study the impact of minimum direct care staffing (MDCS) requirements on nurse staffing levels, nurse skill mix, and quality.

DATA SOURCES

U.S. nursing home facility data from the Online Survey Certification and Reporting (OSCAR) System merged with MDCS requirements. STUDY DESIGN; Facility-level outcomes of nurse staffing levels, nurse skill mix, and quality measures are regressed on the level of nurse staffing required by MDCS requirements in the prior year and other controls using fixed effect panel regression. Quality measures are care practices, resident outcomes, and regulatory deficiencies.

DATA EXTRACTION METHOD

Analysis used all OSCAR surveys from 1999 to 2004, resulting in 17,552 unique facilities with a total of 94,371 survey observations.

PRINCIPLE FINDINGS

The effect of MDCS requirements varied with reliance of the nursing home on Medicaid. Higher MDCS requirements increase nurse staffing levels, while their effect on nurse skill mix depends on the reliance of the nursing home on Medicaid. MDCS have mixed effects on care practices but are generally associated with improved resident outcomes and meeting regulatory standards.

CONCLUSIONS

MDCS requirements change staffing levels and skill mix, improve certain aspects of quality, but can also lead to use of care practices associated with lower quality.