Analysis of nursing home capital reimbursement systems

Health Care Financing Review, Spring, 1991 by Heidi Boerstler, Tom Carlough, Robert E. Schlenker

(1) The Institute of Medicine, citing 1981 Health Care Financing Administration data, indicates that, nationally, 70 percent of Medicare-Medicaid certified nursing homes were proprietary as compared with 22 percent that were nongovernment, nonprofit facilities. Cost reports collected from seven primary States in this study indicate that 60 percent of facilities were owned and 40 percent were leased. This ratio is somewhat skewed by the disproportionate representation of flat-rate States (two were included in the study whereas they are a fairly small minority nationally.) In the two flat-rate States, leased outnumbered owned facilities 1.3 to 1; in the five other study States, ownership occurred 2.5 times as often as leasing.

(2) The model is described in deetail in an appendix which is available from the authors.

(3) The assumption of 100-percent medicaid occupancy produces somewhat misleading simulation results. A typical nursing home might, on average, be about two-thirds filled with Medicaid patients, with the remaining portion filled with Medicare and private-day patients whose per diem charges tend to be higher than those of Medicaid patients. Thus, the 100-percent Medicaid occupancy assumption somewhat underestimates a nursing home's total revenues and overestimates cost to the State. However, this does not affect the validity of the system comparisons of relative differences performed in the study.

(4) Financial data available from 122 of the nursing homes participating in the overall study indicated that 88 percent of nursing home plant, property, and equipment was financed by debt.

References

Baldwin, C.Y.: The Minnesota Nursing Home Reimbursement Studies: Financial Issues Underlying Reimbursement for Minnesota Nursing Homes. Report to the Minnesota Department of Human Services Long-Term Care Management Division, Boston, Mass. Graduate School of Business Administration, Harvard University, 1984.

Baldwin, C.Y., and Bishop, C.E.: Return to nurshing home investment: Issues for public policy. Health Care Financing Review 5(4):43-52. HCFA Pub. No. 03173. Office of Research and Demonstrations, Health Care Financing Administration. Washington. U.S. Government Printing Office, 1984.

Bartlett, L.: Reimbursement of the capital component of nursing home care: Options for the Pennsylvania Medicaid program. Prepared for the Office of Medical Assistance, Pennsylvania Department of Public Welfare. Washington, D.C. Health systems Research, Inc., Aug. 1984.

Boerstler, H., Carlough, T., and Schlenker, R.: An Analysis of Long-Term Care Payment Systems: Analyzing Nursing Home Capital Reimbursement Systems. Final Report, Volume 3. Center for Health Services Research, University of Colorado Health Sciences Center, Denver. Dec. 1988.

Cohen, J., and Holahan, J.: An elevation of current approaches to nursing home capital reimbursement. Inquiry 23(1):23-39, 1986.

Lorenzen, S.: Profitability of the long-term care industry in Texas. Economic Forecasting Section, Economic Analysis Division, Texas Department of Human Resources. Austin, Tex. Nov. 1984.