The Relationship between Staffing,
Quality, and Financial Performance:
For-Profit versus Not-for-Profit
Nursing Homes
Project Team
„
University of Florida
– Alex Laberge, MBA, PT
– Zhou Yang, Ph.D.
– Lloyd Dewald, MS
„
Texas A&M
„
Collaboration with USF (Kathy Hyer, Ph.D.)
and Florida State University (David
McPherson, Ph.D.)
Project Advisor: Vince Mor, Ph.D., Brown
University
– Christopher Johnson, Ph.D.
Robert Weech-Maldonado, Ph.D.
Department of Health Services Research,
Management & Policy
„
1
Background
Research Questions
„
„
2
„
Nursing home quality issues persist
„
Federal and state governments using
market-based approaches to promote QI
At the same time, nursing homes are facing
– 2003 GAO report
Question 1: How does quality of care vary by
nursing home financial performance tier?
Question 2: Does the relationship between
quality and financial performance tier vary by
nursing home ownership (for-profit status)?
„
– Revenue constraints
• Prospective payment systems
• Declining occupancy rates
– Increasing cost pressures
• Higher nurse staffing costs and liability insurance costs
„
Strong financial incentives to control costs
– Will these cost-containment efforts result in lower quality?
3
4
Quality and Financial
Performance
Nursing Home Quality
„ Studies
„
Donabedian (1966) posits a structureprocess-outcome framework for quality
assessment
Causal model SÆPÆO
Structural measures
„
Process measures
„
„
have shown that firms can create
higher quality products and reduce costs
simultaneously
– Higher quality can lead to increased
productivity, more efficient processes, and
ultimately to lower costs
– RN staffing
„ Quality
of care as a basis for strategic
differentiation in healthcare
– Use of physical restraints and urethral catheters
„
Outcome measures
– Pressure ulcers and ADL worsening
5
– Increased customer satisfaction
– Lower customer sensitivity to price
– Enhance private-pay resident market share
6
1
Prior Studies
Data
„ Sources
„
„
Weech-Maldonado and colleagues (2003) showed
that better process and outcomes quality were
associated with higher financial performance.
While higher RN staffing had a negative impact
on financial performance through higher costs, it
did have an indirect positive impact on financial
performance through better outcomes of care
Contribution of present study- longitudinal study
using more recent data and adjusting for potential
endogeneity
„ Sample
of data
– Medicare Cost
Reports
– On-line Survey
Certification of
Automated Records
(OSCAR)
– Minimum Data Set
– Area Resource File
(ARF)
– FY 2000-2004
– Nursing homes in
Florida
– Excluded hospitalbased and
government facilities
– Sample size of
approx. 600 facilities
per year
7
Variables
Dependent Variables
„ Financial
8
Structural Quality
„ RN
– FTE/ 100 residents
„ LPN
– FTE/ 100 residents
„ CNA
– FTE/ 100 residents
„ CNA turnover
„ LPN turnover
performance
– Total profit margin (Net income/ Total
Revenues)
„ Financial
performance tiers (based on
total margin)
– Low (bottom 10%)
– Medium (middle 80%)
– High (top 10%)
Outcomes Quality
„ Quality of care deficiencies
„ Quality of life deficiencies
„ Actual harm citation
„ ADL worsening*
„ New fractures
„ Pressure ulcers- high/low
risk prevalence*
„ Bowel worsening*
„ Bladder worsening*
Process Quality
„ Prevalence
– Restraints used daily
– Total catheters
– Feeding tubes*
9
Control Variables
Physician Extender
„ Payer Mix
„ Case Mix
„ Size
„ Chain Affiliation
„
* Risk adjusted
Analysis
10
Operating Margin (Median)
„ Lagged
independent variables (quality)
to address potential endogeneity
„ Ordered Logit Regressions
2.0%
0.0%
percent
-2.0%
• Year as fixed effect
• Huber/White correction
1999
2000
2001
2002
2003
2004
-4.0%
not for profit
-6.0%
for profit
-8.0%
-10.0%
-12.0%
year
11
2
Operating Revenue Per Patient Day
(CPI adjusted)
Total Profit Margin (Median)
Year
Not for profit
Year
20
04
20
03
For profit
20
01
19
99
03
04
20
02
20
20
00
01
20
20
99
For Profit
300.00
280.00
260.00
240.00
220.00
200.00
180.00
160.00
140.00
120.00
100.00
20
00
Not for profit
19
04
Operating Cost Per Patient Per Day
(CPI adjusted)
$ Per Day
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
Year
Results
Nursing Wages
(CPI adjusted)
25.00
„
20.00
$ Per Hour
03
Year
Other Revenue Per Patient Per Day
(CPI adjusted)
$ per day
20
19
99
-2.0%
02
-1.0%
Profit
120.00
100.00
20
For profit
2004
01
2003
20
2001 2002
20
02
2000
Not for profit
00
1999
160.00
140.00
20
Not for profit
0.0%
200.00
180.00
20
P e rc e n t
1.0%
$ per day
2.0%
RN
15.00
LPN
10.00
CNA
„
Positive trend in financial performance,
especially among for-profit homes
For-profit homes have better financial
performance than not-for-profit homes
– FP have higher operating margins than NFP, and
since 2002 also have higher total margins
5.00
0.00
2001
2002
2003
2004
Year
18
3
Structure and Process Quality and
Financial Performance Tier
Structure
All
Not for profit
Logit OR
p
Logit OR
Outcomes Quality and Financial
Performance Tier
For Profit
p
Logit OR
Outcomes
0.12
0.978
0.41
0.974
0.02
Total LPN FTE per 100 res.
0.991
0.04
0.979
0.02
1.000
0.95
Total CNA FTE per 100 res.
1.004
0.03
1.010
0.05
1.002
0.46
CNA Turnover
1.858
0.12
1.985
0.69
1.834
0.13
LPN Turnover
0.669
0.25
0.417
0.47
0.830
0.61
All
Not for profit
Logit OR
p
Logit OR
For Profit
p
Logit OR
Not for profit
Logit OR
0.986
Process
All
p
Total RN FTE per 100 res.
p
Logit OR
For Profit
p
Logit OR
p
Quality of Care Deficiencies
0.949
0.18
0.986
0.87
0.944
0.17
Quality of Life Deficiencies
0.849
0.00
1.036
0.75
0.831
0.00
Actual Harm Cited
1.040
0.78
1.080
0.39
1.021
0.89
ADL Worsening
1.036
0.00
1.027
0.35
1.038
0.00
Fractures
0.948
0.05
0.957
0.59
0.950
0.07
Pressure Ulcers High/Low
Prevalence
0.021
0.01
0.001
0.05
0.029
0.02
p
Bladder Worsening
0.628
0.68
0.824
0.94
0.509
0.60
Restraints
0.089
0.01
0.043
0.05
0.104
0.04
Bowel Worsening
0.638
0.71
0.519
0.86
0.626
0.70
Feeding Tubes.
0.581
0.74
0.124
0.58
0.842
0.92
Catheters
0.982
0.28
1.013
0.66
0.981
0.34
Results
„
Results
For the overall sample, better financial
performance (total margin) is characterized
„
– Nursing homes with better financial performance
are characterized by higher CNA staffing ratios
and lower restraints and pressure ulcers.
However, they have lower LPN ratios
– Lower LPN but higher CNA ratios
– Lower restraints, lower quality of life deficiencies,
lower fractures, and lower pressure ulcers; but
higher ADL worsening
„
Not-for-profit nursing homes
„
For-profit nursing homes
– Nursing homes with better financial performance
are characterized by lower restraints, pressure
ulcers, and fractures. However, they also have
lower RN staffing and higher ADL worsening
The relationship between quality and financial
performance varies by for-profit status
21
Conclusions
„
„
„
22
Policy/Research Implications
In general, NHs that perform better financially
have lower LPN and RN staffing ratios, yet
have better quality of care in a few process
and outcome measures of care. This
suggests that quality of care can result in
better financial performance
The relationship between financial
performance tier and quality is stronger in the
for-profit sector
While not-for-profit homes performing better
financially seem to substitute LPNs with
CNAs, for-profit nursing homes have lower
use of RNs
„
Findings provide some support for the business case for quality
especially for for-profit nursing homes
Is it revenues or costs driving these results?
Improvements in FL nursing home financial performance in
recent years may be due in part to improvements in quality of
care over time
„ Further research is needed to examine the relationship between
higher financial performance and ADL worsening among forprofit homes
„
„
– Are there structures and processes differences driving these
results?
„
Examine the management strategies of nursing homes with
higher financial performance by which they achieve better
processes and outcomes of care with lower professional staffing
ratios
– Is it that quality results in increased productivity (more efficient use
of LPN/RN staffing)? Better case mix management?
23
24
4
Acknowledgements
Limitations
„
„
Did not account for potential indirect effects of
staffing on financial performance through
better process and/or outcomes of care
Medicare cost report data limited to Medicare
certified NHs
„
Project funded by The Administration on
Aging (subcontract with University of South
Florida)
– Don Grantt, Program Officer, Administration on
Aging
– 99% of dually certified facilities had a Medicare
Cost Report
„
Staffing ratios based on OSCAR data
25
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