Residential Care Supply, Nursing Home Licensing, and Case Mix in Four States

Health Care Financing Review, Spring, 2000 by James Swan, Robert Newcomer

INTRODUCTION

Consumers, private investment, and many State governments view the residential care industry, particularly that sector known as assisted living, as a viable alternative for nursing homes for many persons. Residents in this housing have access to meal and maid services and assistance with such tasks as using medications, dressing, grooming, eating, bathing, and transferring. Increasingly too, States have begun to permit those living in residential care facilities (RCFs) to receive extended periods of skilled nursing care and to remain in these facilities even if they become non-ambulatory or if they are receiving hospice care (Mollica, 1998).

Arguments favoring the growth and expanded role of assisted living or other forms of RCFs in serving the needs of the frail elderly population include consumer preference, affordability relative to nursing homes, and potential reductions in State Medicaid expenditures (Wilson, 1993). Even when accepting these arguments on face value, there is little empirical basis to guide State governments in how to achieve the substitution of supportive housing for nursing home care. Should States further constrain the growth of nursing homes, stimulate the growth of residential care beds, extend access to assisted living by reshaping the eligibility criteria about those who can remain in supportive housing, or provide financial reimbursement for the home and community-based care (HCBC) (e.g., homemakers, personal care aides) that may be needed in such housing? In the absence of their own experience, States look to other States to resolve such questions. Such mimicking may focus on specific policies (e.g., eligibility criteria), while ignoring essential contextual influences (the prevailing ratio of nursing home beds to population), or multiple interactive policies (e.g., reimbursement for RCF care, licensing standards for nursing homes) that are essential to the success of the adopted new policy.

Investigators (Spector, Reschovsky, and Cohen, 1996) at the Agency for Healthcare Research and Quality (AHRQ) estimate that between 25 and 35 percent of the 1-million-plus nursing home residents are there mainly because of limitations in ability to perform personal care tasks such as bathing, dressing, and ambulation. They suggest that a subgroup of these individuals can be potentially served with home care services or by residence in supportive housing.

The AHRQ estimate of the potentially "relocatable" nursing home population has some important limitations. One of these is that it is based on a national sample of nursing home residents, but with too few cases to adjust for local or community-level conditions--such as the availability of alternative services or State policies affecting allowable levels of care. In this article, with nursing home resident characteristics from the nursing home minimum data, we use simulations to test the sensitivity of the AHRQ estimate to community-level contextual factors in four States. These models evaluate how the introduction of two exemplar policies affect case mix, holding constant various facility, State policy, and community characteristics.

One policy is the requirement that all nursing facilities in a State meet the standards appropriate for skilled nursing facility (SNF) licensing. Imposition of this standard implies that facilities will be staffed appropriately to the skilled levels of care and that the facility will have fewer incentives to serve a population with care needs less than those required and reimbursed in skilled care. The second simulated policy is one where the State achieves substantial growth in the number of residential care beds per 1,000 population. A growth in such supply is assumed to be a necessary condition if RCF care is to substitute for nursing home care.

METHODS

The principle data sources used in this analysis are those of the On-Line Survey, Certification, and Reporting System (OSCAR) and the Minimum Data Set (MDS), both maintained by HCFA. With these data, it is possible to calculate case-mix classifications of the residents of each nursing home and to compare the relationship between case mix and various other facility attributes. These data are supplemented to include community characteristics using the Area Resource File (ARF).

OSCAR data are available for certified nursing homes in the United States. These data include facility characteristics and staffing, which are used here. OSCAR data are collected during annual certification surveys by the State or their contracted agencies. The MDS is specific to each resident, measuring functional abilities, medical problems, and emotional states (such as depression and behavior problems). MDS data are pooled in this analysis to classify a facility's case mix. The MDS is collected on all nursing facility residents at or near the time of admission, upon readmission from a hospital, if there is a significant change in status, and quarterly.

Community characteristics were obtained from the 1998 ARE which is a compilation of census and other county-level data assembled by the Bureau of Health Professions, U.S. Department of Health and Human Services. The data elements, whether from OSCAR, MDS, or the ARE pertain to 1995 or reflect governmental estimates for 1995. Exceptions are that hospital discharges are from 1993, and the percent of females in the labor force is from 1990.(1) Residential care beds (defined to include all licensed housing by the State, regardless of the term used by each particular State to describe its supportive housing) data were obtained directly from State licensing and regulatory agencies in each State. Unlicensed RCFs were not counted.