Does prospective payment really contain nursing home costs? - Policy Impact - Statistical Data Included

Health Services Research, April, 2002 by Li-Wu Chen, Dennis G. Shea

DATA

Sources of Data

The data for this study come from four different sources: The Skilled Nursing Facility Minimum Data Set (SNF-MDS) contains cost and patient utilization information for all skilled nursing facilities (SNFs) and nursing facilities (NFs) in the United States. The Online Survey Certification and Reporting System (OSCAR) provides survey and certification information for facilities. The Area Resources File (ARF) provides information that describes the socioeconomic and demographic environment in which nursing homes are operated. Aggregate area wage indices were extracted from the Hospital Wage Indices File (HWAGIF) to reflect the wage level of each specific area where facilities are located. For all of the four data sources, the information for the calendar year 1994 was used. (1)

The nursing home facility, either a SNF or a NE, (2) is the unit of analysis. After merging the SNF-MDS and the OSCAR file by provider identification number, 10,022 records of facilities with data from both sources were obtained. After excluding those records with either incomplete cost information or missing information on key regression variables, 4,635 facilities were finally used in our analyses. (3)

OPERATIONALIZATION OF VARIABLES

Medicaid Payment Methods for Nursing Home Care

Payment methods for nursing home care vary greatly from state to state under the Medicaid program. The information regarding the 1994 Medicaid payment methods for nursing home care in all individual states was obtained from the Medicaid Reimbursement Survey by a research team at the University of California in San Francisco and Wichita State University. (4) Three dichotomous variables were created to indicate the measures of state Medicaid payment policy. COMBINATION equals 1 if a facility was located in a state where some form of a combination of retrospective and prospective payment methods was used in 1994. These combinations include a prospective payment method in which the rate could be adjusted upward. FACILITY-SPECIFIC PPS equals 1 if a facility was located in a state where the payment rate was predetermined based on their individual situations. CLASS PPS equals 1 if a facility was located in a state where the payment rate was predetermined based on the situations of an entire group to which a facility belongs. The facilities that were located in states where a retrospective system was implemented were used as the reference group in the regression analyses. The more flexible and facility-specific the payment is, the less financial risk a facility faces. Therefore, the degree of financial risk imposed on nursing homes ascends from retrospective, combination, facility-specific prospective, to class prospective.

Other Explanatory Variables

Nursing Home Outputs. Three types of patient days are used as the nursing home output measures: Medicare days, Medicaid days, and private days. As discussed earlier, the use of the payment-type output measures could cause endogeneity problems, and thus, we created instrumental measures for these output variables (Method section).