Does prospective payment really contain nursing home costs?

Li-Wu Chen, Dennis G. Shea

Research output: Contribution to journalReview article

15 Citations (Scopus)

Abstract

Objective. To examine whether nursing homes would behave more efficiently, without compromising their quality of care, under prospective payment. Data Sources. Four data sets for 1994: the Skilled Nursing Facility Minimum Data Set, the Online Survey Certification and Reporting System file, the Area Resource File, and the Hospital Wage Indices File. A national sample of 4,635 nursing homes is included in the analysis. Study Design. Using a modified hybrid functional form to estimate nursing home costs, we distinguish our study from previous research by controlling for quality differences (related to both care and life) and addressing the issues of output and quality endogeneity, as well as using more recent national data. Factor analysis was used to operationalize quality variables. To address the endogeneity problems, instrumental measures were created for nursing home output and quality variables. Principal Findings. Nursing homes in states using prospective payment systems do not have lower costs than their counterpart facilities under retrospective cost-based payment systems, after quality differences among facilities are controlled for and the endogeneity problem of quality variables is addressed. Conclusions. The effects of prospective payment on nursing home cost reduction may be through quality cuts, rather than cost efficiency. If nursing home payments under prospective payment systems are not adjusted for quality, nursing homes may respond by cutting their quality levels, rather than controlling costs. Future outcomes research may provide useful insights into the adjustment of quality in the design of prospective payment for nursing home care.

Original languageEnglish (US)
Pages (from-to)251-271
Number of pages21
JournalHealth Services Research
Volume37
Issue number2
DOIs
StatePublished - Apr 2002

Fingerprint

nursing home
Nursing Homes
Costs and Cost Analysis
costs
Prospective Payment System
Skilled Nursing Facilities
Quality of Health Care
Information Storage and Retrieval
Salaries and Fringe Benefits
Certification
Home Care Services
Nursing Care
reporting system
cost reduction
Statistical Factor Analysis
online survey
home care
Outcome Assessment (Health Care)
certification
wage

Keywords

  • Nursing home cost
  • Prospective payment
  • Quality of care
  • Quality of life

ASJC Scopus subject areas

  • Health Policy

Cite this

Does prospective payment really contain nursing home costs? / Chen, Li-Wu; Shea, Dennis G.

In: Health Services Research, Vol. 37, No. 2, 04.2002, p. 251-271.

Research output: Contribution to journalReview article

Chen, Li-Wu ; Shea, Dennis G. / Does prospective payment really contain nursing home costs?. In: Health Services Research. 2002 ; Vol. 37, No. 2. pp. 251-271.
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