Medicare payment changes and nursing home quality: effects on long-stay residents
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Medicare payment changes and nursing home quality: effects on long-stay residents R. Tamara Konetzka · Edward C. Norton · Sally C. Stearns
Received: 6 May 2005 / Accepted: 16 May 2006 / Published online: 3 October 2006 © Springer Science+Business Media, LLC 2006
Abstract The Balanced Budget Act of 1997 dramatically changed the way that Medicare pays skilled nursing facilities, providing a natural experiment in nursing home behavior. Medicare payment policy (directed at short-stay residents) may have affected outcomes for long-stay, chronic-care residents if services for these residents were subsidized through cost-shifting prior to implementation of Medicare prospective payment for nursing homes. We link changes in both the form and level of Medicare payment at the facility level with changes in resident-level quality, as represented by pressure sores and urinary tract infections in Minimum Data Set (MDS) assessments. Results show that long-stay residents experienced increased adverse outcomes with the elimination of Medicare cost reimbursement. Keywords Prospective payment · Nursing homes · Medicare · Quality of care JEL Classification
I11 · I18 · H51
Introduction The Balanced Budget Act of 1997 (BBA) represented “the most far-reaching changes to the Medicare program since its inception” (Ross, 1999). It dramatically changed the form of payment for Medicare services in skilled nursing facilities (SNFs) by replacing the former cost-based reimbursement system with a prospective payment system (PPS). At the same time, the overall level of funding was reduced by several billion dollars, reducing the average reimbursement for the majority of SNFs. Like the PPS system in hospitals, the SNF PPS was introduced to counter unsustainable increases R. T. Konetzka (B) Department of Health Studies, University of Chicago, 5841 S. Maryland Ave., MC2007, Chicago, IL 60637, USA e-mail: [email protected] E. C. Norton · S. C. Stearns University of North Carolina at Chapel Hill, Chapel Hill, NC 27599-7590, USA
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in Medicare spending while maintaining access and quality. This major policy change offered a natural experiment in the effects of Medicare reimbursement on nursing home quality of care. Debate over the new policy has focused on Medicare residents only, who are generally short-stay residents with rehabilitation needs. However, most Medicare SNF residents receive care in nursing facilities that also have large long-stay, chronic-care populations, the majority of whom are funded by Medicaid. Facilities blend multiple revenue streams to cover fixed and operating costs for all residents, and it has long been asserted that high private-pay and Medicare margins are used to subsidize substantially lower Medicaid margins. Financial pressures from Medicare may lead to a reduced ability to subsidize quality for the long-stay population. We hypothesize, therefore, that spillover effects from the Medicare budget cuts may result in decreased quality of care for long-stay residents. Analysis of provider beh
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