The Impact of Regulation Markets Information on Quality in Nursing Homes II

The Market for Nursing Home Quality David Grabowski University of Alabama at Birmingham Background • The standard economic model of quality competition assumes: – – – – Privately purchased care Perfectly informed consumers Choice across providers No government intervention • The NH market clearly deviates from all of these assumptions History • In the 1970s, states generally paid for NH care on a cost-based basis • Little information typically available to potential NH consumers • Certificate-of-need and construction moratoria often created excess demand for services – Occupancy rates were above 95% Current Market (Times Have Changed) • States generally pay for care on a case-mix adjusted prospective basis • Public quality reporting now available • CON/moratoria no longer relevant in many NH markets due to the growth in assisted living – Occupancy rates now around 87% – One-third of facilities that call themselves "assisted living" have been in business for five or fewer years, and 60% have been in operation for ten or fewer years (Hawes et al., 1999) Examples: Market for Quality • Beverly Enterprises, Inc. – Currently experimenting with model of “residentcentered” care in 10 NHs in order to gain competitive advantage – 11 NHs formed alliance to compete on the basis of quality for managed care business – Philadelphia has experienced growth in CCRCs due to increased housing wealth; Buffalo has experienced growth in assisted living due to large pensions of retired factory workers • Wellspring Innovative Solutions, Inc. • Philadelphia/Buffalo LTC markets Research: Market for Quality • Innovation – Competition among nursing homes associated with more Alzheimer’s and sub-acute care units (BanaszakHoll et al., 1996) • Facility closures – High deficiency facilities more likely to voluntarily exit the market (Angelelli et al., 2003) • Response to Medicaid Payment Changes – Higher Medicaid payment rates are associated with better quality (Grabowski, 2001) Grabowski & Angelelli, in press HSR Effect of Medicaid Payment on patient-level riskadjusted pressure ulcer incidence Elasticity - 0.16* - 0.06 - 0.31* All Markets High Occupancy Markets High Medicaid Homes *= statistically significant at the 1% level Research Needs 1) What are the returns to greater competition in today’s marketplace? – Earlier work finds that more concentrated markets achieve better outcomes (Zinn, 1994) • I/O theory generally holds that when market share is concentrated in a few large firms, competition is diminished • In health care markets, concentration may diminish the effect of information asymmetry, which could increase competition (Pauly and Satterthwaite, 1981) – Need to update this work with more recent data and better quality measures Research Needs 2) Can we adjust Medicaid payment policy to better harness market forces? – Why not reward high quality providers with higher Medicaid payment rates? – Demonstration-based evidence supports such a payment system (Norton 1992) – Additional demonstrations… – Tradeoffs of investment in NH and other LTC settings Research Needs (cont.) 3) Will greater consumer information create greater quality competition? – We need more research on the relationship between consumer information and consumer choice. – Limited knowledge of how hospital discharge planners influence process Research Needs (cont.) 4) What is the return to increased NH regulation? – State and Federal governments both are discussing increased minimum staffing standards – Federal government continues to use costly survey and certification process – Are there market-based alternatives that may encourage more efficient outcomes? Research Needs (cont.) 5) What is the role of assisted living and other NH substitutes towards encouraging good outcomes? – There is no research tying growth in assisted living market to NH quality – Very limited government intervention in assisted living markets in most states • Thus, no systematic data – However, some states have put assisted living providers under CON