NEWS

Study: Medicare cuts for skilled nursing facilities may jeopardize quality of care; negative trends reversed when funding later increased

WASHINGTON, D.C. -- A study released today (May 14) by the University of North Carolina at Chapel Hill School of Public Health shows that the 1998 implementation of the Medicare prospective payment system (PPS) for skilled nursing facilities may have negatively affected the quality of patient care, as measured by staffing levels and regulatory deficiencies. Further, the study shows that trends in staffing and deficiencies improved when government officials restored Medicare funding.

In releasing the study, Dr. Bill Roper, dean of UNC’s School of Public Health, a former administrator of the federal agency that oversees the Medicare program and one of the study’s principal investigators, called the findings "a good start in answering a difficult question." The study, he said, "directly links PPS rates to quality-related factors and finds that there may be cause for concern."

UNC School of Public Health researchers used government data drawn from nursing home inspection reports as a proxy for quality. Analysis of those data showed that implementation of the Medicare prospective payment system was associated with a statistically significant increase in the total number of quality of care deficiencies, Roper said. As the percentage of Medicare patients in facilities increased up to 26 percent (which includes 90 percent of facilities), the relative deterioration in quality, as measured by a greater number of total deficiencies, also increased.

Following Medicare funding adjustments mandated by the Balanced Budget Refinement Act (BBRA) of 1999, the negative trends in staffing and deficiencies were reversed – with facilities that serve a higher percentage of Medicare patients (up to 26 percent) showing the greatest improvement in quality, Roper said.

In addition, the data suggest that prospective payment system implementation was associated with a reduction in professional nurse staffing hours, Roper said. This reduction was characterized by decreased registered nurse hours for most skilled nursing facilities as well as a reduction in registered nurse and licensed practical nurse hours combined. Following the rate increases presented by BBRA enactment, skilled nursing facilities reversed this trend by increasing registered nurse hours.

"Taken together, these results show that skilled nursing facilities reduced professional nurse staffing hours and were cited with more deficiencies following the implementation of PPS," Roper said. "This effect is most likely driven by the fact that labor costs account for more than 70 percent of the typical skilled nursing facility’s operating budget."

This assessment is reinforced by the increase in registered nurse staffing stimulated by BBRA rate adjustments.

"The analysis of staffing and deficiency data provides evidence that PPS implementation may have had a negative effect on quality and that funding provided through BBRA reversed some of that effect," Roper said. "The most significant effects related to the reduction in RN hours and the increase in total number of deficiencies, especially quality of care deficiencies."

The study revealed no difference in the effects of PPS and BBRA between chain providers and independent providers, non-profit providers and for-profits, or urban and rural facilities.

In response to concerns about skilled nursing instability and Medicare underfunding, Congress restored some of the funds cut as part of PPS implementation. This was accomplished through the BBRA in 1999 and the Benefits Improvement and Protection Act of 2000. These adjustments, however, are due to expire on Oct. 1.

The UNC study was commissioned by Beverly Enterprises and supported by $98,612 in funding by the firm. The research effort was led by Roper and Dr. Kerry Kilpatrick, professor and chairman of the school’s department of health policy and administration. Others on the research team included R. Tamara Hodlewsky and Deokhee Yi, doctoral students in health policy and administration; and Dr. Virender Kumar, who earned his doctorate in health policy and administration in May 2001 and is now with Westat Corp. in the Washington, D.C., area.

In its 60-plus-year history, the UNC School of Public Health has emerged as one of the nation’s premier schools of public health, enrolling more than 1,200 students annually and having more than 190 full-time faculty members. The school features seven academic departments – biostatistics, environmental sciences and engineering, epidemiology, health behavior and health education, health policy and administration, maternal and child health, and nutrition – as well as a program in public health leadership and many centers and institutes.

To learn more about the school or to tap into current seminars, lectures and webcasts on topics ranging from bioterrorism and community preparedness to prenatal health and health care financing, visit the school’s World Wide Web site at www.sph.unc.edu.

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School of Public Health contact: Lisa Katz at (919) 966-7467 or lisa_katz@unc.edu

News Services contact: Deb Saine at (919) 962-8415