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

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

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)

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

Where are They? Resource poor facilities are located in resource poor communities

Percent Resource Poor by Location and Per Capita Income UrbanRural Top Quintile Income Distribution 15%5% Bottom Quintile 26%28%

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%)

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%)

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%)

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%)

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

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

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

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

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

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

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

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

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

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

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

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

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

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