Effects of Long-term Care Market Competition on Nursing Home Quality Wei Lu 9/19/2013

Research Questions Is nursing home quality affected by competition from nursing homes, assisted living facilities, and home care agencies? What are some other factors that influence the nursing home quality? Are nursing home price level and residents characteristics affected by competition in the long-term care market?

Outline Introduction ◦ Background ◦ Literature Review ◦ Contribution Empirical Methods ◦ Data ◦ Regression Framework Results Conclusion

Background

Background Long-term care encompasses a broad range of services, including medical and non-medical care provided to people who need assistance performing activities of daily living. About 10 million people in the United States need long-term care services. In 2010, total spending for long-term care services was $207.9 billion (8 percent of all U.S. personal health care spending), most of it paid by the federal-state Medicaid program.

Background Historically, nursing homes have been the major providers of long-term care to older adults. Enabled by long-term care legislation that favors community care over nursing home care, and the Medicaid 1915(C) waiver programs that allow Medicaid to cover assisted living expenses, more and more seniors have shifted from receiving care in a nursing home to home and community-based services.

Background Figure 1: Home and Community Based Services as a Percentage of Medicaid Long-term Care Expenditures, FY

Background Assisted living facilities are community-based residential long term care centers that provide housing and supportive services for older adults. They have been an important choice for older adults besides home health care. Since 1990 the total number of beds in assisted living facilities has grown rapidly, more than doubled between 1990 and 2002.

Literature Review

Grabowski (2001) measured the effects of facility characteristics, market structure, and state-level regulations on the quality of nursing home services. Findings: ◦ 1) There is a statistically significant positive relationship between the level of Medicaid reimbursement and nursing home quality. ◦ 2)The quality effect is smaller in the tightest markets because of the excess demand paradigm.

Literature Review Jung et al. (2010) used data from to examine the effects of home health agency characteristics on quality of home health care following the launching of “Home Health Compare.” Findings: ◦ 1) Quality indicators that measure ADL improved significantly after the launch of Home Health Compare. ◦ 2) Agency characteristics, such as profit-status or ownership, were related to home health quality.

Literature Review Stevenson et al. (2010) collected county-level assisted living supply data to analyze the special characteristics of this sector. Findings: ◦ 1) Assisted living facilities have located disproportionately in areas with higher education, income, and wealth. ◦ 2) Residents in areas with a greater penetration of assisted living facilities rely less on Medicaid and more on private insurance. ◦ 3) States with a greater penetration of assisted living facilities also spend a greater part of their budget on home and community-based services.

Literature Review Gruneir et al. (2007) examined the effects of long-term care market competition on nursing home dementia special care units. Findings: ◦ 1) Competition from assisted living facilities only affected the profile of residents in the dementia special care units. ◦ 2) A nursing home's investment in these units was influenced by the behavior of nearby nursing homes but not by other types of long-term care providers.

Literature Review Bowblis (2012) examined how the market structure and growth of assisted living facilities affected nursing home quality in Ohio between 1995 and Findings: ◦ 1) Nursing home quality is lower in more competitive markets. ◦ 2) There are mixed effect of assisted living facility market structure on nursing home quality. ◦ 3) The physical condition of nursing home residents is worse in areas where there are more assisted living beds, and the percentage of nursing home residents using antipsychotic medications is lower.

Contribution

Contribution This study will examine the effects of both home care and assisted living facilities on nursing home quality. In a few studies that have addressed interactions between assisted living facilities and nursing homes, state-specific data were analyzed. In this study I will analyze data from a nationwide sample. State-level regulations and policies affecting nursing homes, home care agencies, and assisted living facilities will also be included.

Data

Data Sets This study will use facility and county-level data from all states in 2010 from several sources, including: ◦ Certification And Survey Provider Enhanced Reports (CASPER) ◦ Nursing Home Compare ◦ Provider of Services File from CMS ◦ Assisted living supply data collected by Dr. Stevenson and Dr. Grawboski ◦ The MetLife Market Survey of NH & AL costs 2010 ◦ Area Resource File (ARF) ◦ State Data Book on Long Term Care Total observation number is 13426

Facility Level Nursing Home Variable Summary VariableMeanStd.MinMax Total RN/Beds Total LPN/Beds Total Nurse Aids/Beds Health deficiency % with Facility Acquired Catheter % with Facility Acquired Pressure Sores % Physically Restrained % Antipsychotic Drug Error Rate %

Facility Level Nursing Home Variable Summary (Cont.) VariableMeanStd.MinMax NH total Beds Per Capita County Average % of Empty Bed Ownership Government= For-profit= Provider Based Facility Special Care Beds Case Mix Minutes % of Medicaid Residents Nursing Home HHI(1000)

County Level Variable Summary VariableMeanStd.MinMax Num of AL Facilities Per Capita Num of HC Agencies Per Capita Census Region Code Per Capita Income(1000) % Pop % Adult Female % Medicaid of Mortality Rate Poverty Rate % White % African American Pop Density Per Square Mile(1000) Low Education Type Code

County Level Variable Summary VariableMeanStd.MinMax NH Daily Avg Price(Private Pay) NH Price Ratio (Medicaid/Private) AL Daily Avg Price HC Hourly Avg Price Adult Day Care Daily Avg Price NH CON AL CON NH Reimbursement Method NH Case Mix Adjusters AL temporal Nursing Service AL Medicaid Waiver AL State Plan AL Reimbursement Method

Economic Framework Proxy for the market Quality measurement Case Mix Excess demand

County as Market County is used to approximate the market for this study. Although it is not a perfect measure for the relative market for competition, the county is a reasonable proxy of the market for nursing home care given patterns of funding and resident origin. Nyman (1994) found 80% of residents in Wisconsin facilities chose a nursing home located in the county in which they resided before entering the home. Most economic studies have used the county as a proxy for the nursing home market (e.g. Nyman, 1985; Gertler, 1992; Cohen and Spector, 1996).

Quality Measures: Quality is multidimensional. It can be measured with various kinds of variables. Donabedian (1996) provides a framework to analyze quality in the health care market. According to him, quality can be measured by three groups of variables: Structure: measures of organizational characteristics Process: interactions between health care practitioner and patient Outcome: changes (desirable and undesirable) in individuals and populations that are attributed to health care

Excess Demand When excess demand exists, the more profitable private patients are admitted first, then the remaining beds are filled with Medicaid patients. Different studies have reached different conclusions about the relationship between excess demand and nursing home quality. Analyzing methods: ◦ Use county average percentage of empty beds as instrument variable for excess demand.

Case Mix Measures: Case-mix index expressed in minutes of staff time is included to control for the issue of different level of sickness of residents. The Management Minutes system designed by Bill Thoms (Cohen & Spector 1996) is used. Case mix was calculated as follows: A(20) + B(18) + C(30) + D(30) + E(20) + F(48) + G(90) + H(90) + I(45) + J(32) + K(20) + L(50) + M(36) A=% of residents needing full assistance bathing B=% of residents needing partial assistance bathing C=% of residents needing full assistance dressing D=% of residents needing partial assistance dressing E=% of residents catheterized F=% of residents incontinent G=% of residents needing parenteral feeding H=% of residents needing tube feeding I=% of residents needing assistance eating J=% of residents nonambulatory K=% of residents with pressure sores L=% of residents receiving bowel/bladder retraining M=% of residents receiving special skin care

Regression Framework

Quality Measures: Dependent Variables The quality of nursing home care in this study is measured at facility level in three ways, i.e., from structure, process and outcome measurement, including: ◦ Staffing level(RN,LPN, Nurse Aides/Beds) ◦ Number of regulatory health deficiencies ◦ Drug error rate ◦ Percentage with facility acquired catheters ◦ Percentage with facility acquired pressure sores ◦ Percentage physically restrained ◦ Percentage use antipsychotic medicine

Quality Measures: Independent Variables Market Structure: ◦ Herfindahl index (Nursing homes) ◦ Number of assisted living facility per capita ◦ Number of home care agencies per capita ◦ County average percentage of empty beds Nursing Home Facility Characteristics: ◦ Nursing home total beds per catpia ◦ Ownership ◦ For/Non- profit ◦ Provider based facility ◦ Percentage Medicaid Residents ◦ Special care beds ◦ Case mix

Quality Measures: Independent Variables County-level Demographic Characteristics: ◦ County per capita income ◦ County percentage of population adult female ◦ Mortality rate ◦ Region factor ◦ Poverty rate State policy factors ◦ Nursing homes:  Medicaid nursing home reimbursement system  Case-mix adjusters  Certificates of Need ◦ Assisted living facility  Certificates of Need  Facility scope of care  Medicaid waiver  State plan  Reimbursement method

Statistical Model Q im = β 1 S m NH + β 2 S m AL + β 3 S m HC + β 4 X im + β 5 Z m + β 6 R+ ε im ◦ Q im : nursing home quality variables of nursing home i in market m ◦ S m NH,S m AL, S m HC :market structure of nursing homes, assisted living facilities, and home care agencies ◦ X im : nursing home facility characteristics ◦ Z m : county level demographic characteristics ◦ R : state regulations

Results

* significant at the 90% confidence level ** * significant at the 95% confidence level *** * significant at the 99% confidence level + positive effect on quality - negative effect on quality R squared RN/Bed LPN/ beds Nurse Aids/bed Health Deficiency Physically Restrained Antipsy- chotic Catheter Pressure Sore Drug Error rate HC agency *** ** AL facility *** *** HHI *** *** *** * _cons ***0.0633***0.3166***8.7070*** * *** Quality Regression

Price Regression regressionNumber of obs F( 33, 13392) Prob > F 0 R-squared Root MSE px1Coef. t fx2cc *1.90 fx6p *** fx ***3.91 fx ***-2.42 fx *1.79 fx ***9.98 fx fx ***2.69 sx1cc-23.81***-4.50 sx2cc ***-3.13 sx12cc ***3.77 mx *** mx2cc mx ***10.05 mx ***11.36 mx ***-7.71 mx ***-9.21 mx ***3.75 mx ***-4.99 mx ***-6.84 mx14cc ***9.04 mx ***7.95 px ***60.58 px ***13.74 px ***6.73 px ***14.43 px *** px8c ***5.27 px *** px12c ***15.13 px *** px14c ***26.17 px17c ***14.87 _cons ***-8.53 NH Private Price Coefficient HC agency *** AL facility *** HHI ***

Case Mix Regression regressionNumber of obs F( 33, 13392) Prob > F 0 R-squared Root MSE fx14Coef. t fx2cc fx6p ***-7.67 fx fx ***-2.91 fx fx *1.71 fx sx1cc ***-3.22 sx2cc ***3.04 sx12cc ***5.10 mx ***8.16 mx2cc ***-3.91 mx mx mx ***2.87 mx ***-4.38 mx mx ***6.91 mx ***8.65 mx14cc ***-6.69 mx px ***5.08 px ***2.59 px ***-6.14 px ***-2.96 px ***-5.10 px ***2.86 px8c px ***3.90 px12c px **-1.96 px14c-1.958*-1.85 px17c ***6.24 _cons ***9.54 NH Case MixCoefficient HC agency *** AL facility *** HHI ***

+ positive effect on quality - negative effect on quality R squared RN/Bed LPN/ beds Nurse Aids/bed Health Deficiency Physically Restrained Antipsy- chotic Catheter Pressure Sore Drug Error rate Empty beds %Medicaid resident Ownership For-profit NH daily avg price AL daily price ---- HC hourly avg price Adult day care price NH CON ++-- AL CON Quality Regression

Conclusion

Conclusion Nursing home quality indicators are affected by competition from assisted living facilities, home care agencies, and nursing homes. Competition from assisted living facility drives down the private price level, leaves nursing home with sicker residents, leads to quality deterioration in nursing home care. Home care agencies influence case mix of nursing home residents positively, however, they still bring down the price level and quality of nursing homes. Other factors such as county average percentage of empty beds, ownership status, for-profit status, and percentage of Medicaid resident have negative effects on nursing home quality, while nursing home private price, and Certificate of Need regulation in assisted living affect nursing home quality positively.

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