American Nursing Homes: Two-Tiered Care System Analysis

1. Driven to Tiers:Evidence for a Two-Tiered System of Nursing Home Care Jacqueline Zinn Temple University Vincent Mor Brown University

2. Integrating Long Term Care into the Mainstream: The Case of Nursing Homes • To document the positive and negative consequences of the current transformation of American nursing homes through an examination of how the industry relates to other health care delivery system components • To identify the health and social consequences for Medicaid residents located in markets characterized by high levels of competition for more desirable insurance segments

3. Methods • 2000 national OSCAR data (14130 certified facilities) • 2000 MDS data • 2000 ARF data • 1998 case studies of seven markets: Philadelphia, Cleveland, Toledo, Seattle, Buffalo, Syracuse and Jackson MS • Nursing home administrator survey (n=660)

4. Defining the Two-Tiered System: Resource Poor vs. Non-poor Facilities • Resource Poor: Composite Measure • Medicaid Census >85% • Private pay <10% • Medicare < 8% • Least opportunity for cross-subsidization • 13.9% of facilities in 2000 • 15.6% for-profit, 9.7% non-profit • On average 93% Medicaid, 2% Medicare, 5% private pay • Does not take into account endowments of non-profit homes so misclassification possible

5. Where are They? • Resource poor facilities are located in resource poor communities

6. Percent Resource Poor by Location and Per Capita Income

8. Profile of Resource-poor Facilities • Lower number of RN FTEs (3.1 vs. 4.9) and aide FTEs per 100 residents (31.3 vs. 33.9) • No difference in LPN FTEs • Less than 1/3 the number of physical therapists per 100 beds (.4 vs. 1.4) • Fewer administrators per 100 residents (3.6 vs. 4.4) • Fewer had MD extenders (18 vs. 20%)

9. Profile of Resource-poor Facilities • Virtually no specialty care for Alzheimer’s Disease (2% vs.15%) • More likely to be terminated from federal program participation (13.3% vs. 6.5%) • More likely to experience a change in ownership (9% vs. 6.6%)

10. Profile of Resource-poor Facility Residents • Case mix acuity more severe in non-profits (.82 vs. .80) less severe in for-profits (.77 vs. .81) • Higher percentages of black residents (36 vs. 9%) • Higher proportion of ambulatory residents (21.4 vs. 13%) • Higher proportion of residents under age 65 (20.1 vs. 8.4%) • Over twice as likely to have a psychiatric diagnosis (21.2 vs. 10.4%) • Higher proportion of mentally disabled (3.6 vs. 1.5%)

12. Profile of Resource-poor Facility Residents • Case mix acuity more severe in non-profits (.82 vs. .80) less severe in for-profits (.77 vs. .81) • Higher percentages of black residents (36 vs. 9%) • Higher proportion of ambulatory residents (21.4 vs. 13%) • Higher proportion of residents under age 65 (20.1 vs. 8.4%) • Over twice as likely to have a psychiatric diagnosis (21.2 vs. 10.4%) • Higher proportion of mentally disabled (3.6 vs. 1.5%)

13. Quality Issues • Resource poor facilities • Controlling for state, higher number of current cited deficiencies (12.3 vs. 7.9) and health deficiencies (5.8 vs. 3.7) • Controlling for diagnosis, twice as likely to be on anti-psychotics (27.3 vs. 17.9%) • Greater use of restraints (8 vs. 7%) • Have fewer RNs per bed • Cognitively impaired residents much more likely to be tube-fed • Higher prevalence of pressure ulcers only in for-profit resource poor (18 vs. 17%) • Evidence that poor and frail residents served by “have not” providers are at risk for receiving substandard care

14. What’s Driving the Two-tiered System? • Maldistribution of social investment in nursing home care • Poorest facilities concentrated in poorest communities • Maldistribution of qualified management with creativity and expertise to get out of lower tier • Inability to of resource poor facilities to cost shift • Medicaid like a school payment voucher • Borne amendment repealed by BBA 1997 means no federal statutory protection for adequate reimbursement • Market and regulatory developments pose barriers to upward mobility

15. Reinforcing Mobility Barriers in the Two-tiered System: Increased Acuity • Initially prompted by DRG implementation, accelerated by growth of managed care • Proportion of facilities with more than 11% of residents requiring tube feeding: • 1991: 10% • 1999: 23% • Proportion of facilities providing IV therapy services • 1991: 14% • 1999: 35% • Number of facilities with Medicare census >30% increased from 5.8% to 15% between 1987 and 1995

16. Reinforcing Mobility Barriers in the Two-tiered System: Increased Acuity Custodial patients displaced Acuity intensifies stratification

17. Reinforcing Mobility Barriers in the Two-tiered System: Assisted Living • Siphons off custodial private pay residents • No substitute: NH Admission closer to spend-down • Limits ability to cross-subsidize • Alternatives: Sub-acute care or Medicaid dependence

18. Reinforcing Mobility Barriers in the Two-tiered System: Assisted Living Acuity intensifies Medicaid displaced Custodial Private pay siphoned Assisted living grows stratification Ability to Cost shift declines Medicaid dependent

19. Reinforcing Mobility Barriers in the Two-tiered System: Implementation of PPS for SNFs • Limits ability to cost shift • Increases financial risk • Promotes market consolidation • Displacement of Medicaid residents

20. Reinforcing Mobility Barriers in the Two-tiered System: Implementation of PPS for SNFs Financial risk Market consolidation PPS implementation stratification Ability to Cost shift declines Medicaid dependency

21. Reinforcing Mobility Barriers in the Two-tiered System: Managed Care Selective Contracting and Referral • Facilities with limited resources even further disadvantaged in the face of managed care • Being resource poor decreases the odds of having a managed care contract by 60% • More careful scrutiny of resource poor than resource rich facilities by MCOs: held to higher standards • While 60% of facilities have MCO contracts, a small percentage (20%) get most of the referrals • Opportunity costs of pursuing managed care contracts high for resource poor facilities

22. Reinforcing Mobility Barriers in the Two-tiered System: Managed Care Selective Contracting and Referral Resource poor De-selected By MCOs Medicaid dependent stratification

23. Conclusions • To a greater or lesser degree all US communities facing a transformation of the nursing home sector • Residual pool increasingly relegated to serving higher concentrations of poorly reimbursed Medicaid residents • Low level of resources may compromise ability to provide high quality care

24. Why Not Let Them Fail? • More likely to be terminated from federal programs • CMS quality indicator reporting • Access for minority elders, mentally ill and challenged • Closures effect the poorest communities • Challenge:Design policies that enable transformation without penalizing residents of homes unable to make the transition

25. Mitigating Adverse Consequences of the Two-Tiered System • Decrease inequities in social investment • Selectively increase the amount of the Medicaid “voucher” without rewarding poor performance • Training programs to upgrade management in resource-poor facilities • End game strategies • State or municipal rescue of failed facilities • Risk pools for displaced Medicaid residents to facilitate resident placement when “permanantly failed” homes are closed

27. Mitigating Adverse Consequences of the Two-Tiered System • Decrease inequities in social investment • Selectively increase the amount of the Medicaid “voucher” without rewarding poor performance • Training programs to upgrade management in resource-poor facilities • End game strategies • State or municipal rescue of failed facilities • Risk pools for displaced Medicaid residents to facilitate resident placement when “permanantly failed” homes are closed