Nursing Home Costs and Quality: Is There a Tradeoff?
Robert Weech-Maldonado, Ph.D.
Department Health Services Research, Management and Policy
University of Florida
Background
Nursing home quality issues persist– 2003 GAO report
Federal and state governments using market-based approaches to promote QI
At the same time, nursing homes are facing revenue constraints
– Prospective payment systems– Declining occupancy rates
Strong financial incentives to control costs– Will these cost-containment efforts results in lower quality?
Nursing Home Quality
Donabedian (1988) posits a structure-process-outcome framework for quality assessment
Causal model SPO Structural measures
– RN staffing
Process measures– Use of physical restraints and urethral catheters
Outcome measures– Pressure ulcers, cognitive decline, and mood decline
Theoretical Considerations
Economics– Newhouse (1970) model of hospital behavior with respect to
quality of care – Quality of care is associated with increased costs
Strategic management – Cost leadership incompatible with quality differentiation
strategy Quality management
– Quality brings reduced costs Prevention Process Improvement
Methodological Considerations
Definition and measurement of quality– Relatively few studies have used outcome measures– Limitations of existing nursing home quality data
(OSCAR and MDS) Operationalization of costs
– Total costs versus operating (patient) costs Cost-quality relationship
– Linear vs. non-linear Endogeneity
Previous Studies
Most studies have used structural and process measures of quality, and have been limited to OSCAR measures of quality
Four studies used MDS risk-adjusted outcomes– Structural equation modeling
Weech-Maldonado, Neff, and Mor (2003) – Cost functions
Mukamel and Spector (2000) Hicks et al. (2004) Weech-Maldonado, Shea and Mor (2006)
Weech-Maldonado, Neff, and Mor (2003)
NY, KS, VT, ME, and SD (1996) Using SEM, examined the direct and indirect
effects of structure, process and outcome quality on costs– Structure: RN staffing mix– Process: restraints, urethal catheters– Outcomes: pressure ulcer incidence/worsening,
mood decline, and cognitive decline
Weech-Maldonado et al. (2003)
Major findings– Structure
Greater RN staffing leads to higher costs, but higher RN staffing has an indirect negative effect on costs via its positive effect on outcomes of care
– Process While process quality does not exhibit a significant relationship
with costs, better process of care has an indirect negative effect on costs via its positive effect on outcomes of care
– Outcomes Facilities with better outcomes quality have lower costs.
- .040 .083
RN Staffing
Process Quality
Outcomes Quality
Operating Margin
Private Market Share
Costs
Revenues
.040
.092
.043
-.073
-.952
.816
Quality, Costs, and Financial Performance
Mukamel and Spector (2000)
NY facilities in 1991 Cost functions using three outcome measures:
deterioration in functional status, worsening of pressure ulcers, and mortality
Cost-quality relationship non-monotonic with an inverted U shape
There are care regimens where nursing homes are able to achieve both lower costs and better quality of care
Hicks et al. (2004)
MO facilities Cost functions using three outcome
measures: ADL decline, pressure ulcer incidence, and weight loss
Similar results to Mukamel and Spector (2000)
Weech-Maldonado, Shea, and Mor (2006)
NY, KS, VT, ME, and SD (1996) Cost functions using two outcome measures:
pressure ulcers incidence/worsening and mood decline
Weech-Maldonado et al. (2006)
Major findings– Non-monotonic relationship between quality and
costs– Cost-quality relationship varies by outcome
Pressure ulcers and costs– Inverted U shape curve
Mood decline and costs– Relatively flat curve at the lower range of quality but
increasing costs associated with improved quality after threshold
Pressure Ulcer Worsening
0.85
0.9
0.95
1
1.05
1.1
-0.2 -0.15 -0.1 -0.05 0 0.05 0.1 0.15 0.2
Low Quality High Quality
Patie
nt C
osts
*
.
* Average Facility = 1
Mood Decline
0.85
0.9
0.95
1
1.05
1.1
-0.2 -0.15 -0.1 -0.05 0 0.05 0.1 0.15 0.2Low Quality High Quality
Patie
nt C
osts
*
* Average Facility = 1
Conclusions
Higher quality not necessarily associated with higher costs
Importance of considering the direct and indirect effects of quality on costs as implied by the SPO framework
Cost-quality relationship is complex and more aptly called non-monotonic
Cost-quality relationship appears to vary depending on the outcome examined
Future Research
Cost-effectiveness of interventions designed to simultaneously improve quality and reduce costs
Contextual factors associated with both higher quality and lower costs
SPO linkages of quality and their impact on cost Identify reliable and valid measures of process care Longitudinal studies examining the cost-quality
relationship
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