The conceptual framework presented in chapter two will serve as the guide for
presenting the information for the three case studies. The focus of the inquiry is upon the
three nursing homes that underwent a culture change process. The key components of the
conceptual framework used to describe each case include: the context for each case, the
resource system, the environment system and the organizational system. Each case is first
described in detail. These descriptions are then followed by a comparison discussion of all
three cases.
Context for the Three Cases
In order to evaluate the costs and values of implementing the household model in each
of the three nursing homes, it is crucial to understand the context of the nursing home
nationally as well as regionally and locally. Each case study is a nursing home with a shared
cultural role of providing 24 hour nursing care overseen by providers who operate within a set
of rules and regulations prescribed by various government entities. While there is a mutual
understanding for what a nursing home is in this country, all three nursing homes have
different social, cultural, political, and economic contexts that influence their resources and
values. Nursing homes are subject to both federal and state policies, rules and regulations in
the United States. Policy makers and constituencies have concerns for defining and maintaining
quality in nursing homes as well as concerns for limiting costs (Capitman et al., 2005b). Market
forces and the economy also impact the business of operating a nursing home. Accordingly, the
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economic lens, as well as an overview of the U.S. economy during the household conversions.
This discussion is followed by a brief overview of the state policies for nursing homes in which
the cases reside. Next, the regional and organizational contexts for the three nursing homes
are summarized. Finally, this section concludes with a comparative summary in which unique
differences or similarities between the three cases are highlighted.
National Nursing Home Context
Nursing homes that receive federal funds are overseen by the Centers for Medicare and
Medicaid Services (CMS); a federal agency located within the United States, Department of
Health and Human Services. CMS (2005) classifies nursing homes as either a skilled nursing
facility or a nursing facility, which are defined as the following:
“Skilled nursing facility” is defined as an institution (or a distinct part of an institution) which is primarily engaged in providing skilled nursing care and related services for residents who require medical or nursing care, or rehabilitation services for the
rehabilitation of injured, disabled, or sick persons, and is not primarily for the care and treatment of mental diseases . . . .
“Nursing facility” is defined as an institution (or a distinct part of an institution) which is primarily engaged in providing skilled nursing care and related services for residents who require medical or nursing care, rehabilitation services for the rehabilitation of injured, disabled, or sick persons, or on a regular basis, health-related care and services to individuals who because of their mental or physical condition require care and services (above the level of room and board) which can be made available to them only through institutional facilities, and is not primarily for the care and treatment of mental diseases . . . (pp. 5–6).
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Based upon these definitions, nursing homes are in existence to provide medical services for
those in need (i.e. Primary mental health care needs are to be addressed by other institutions).
In the United States, access to healthcare for the elderly is one of the few entitlement programs
that exist, and thus the political context for nursing homes is substantial. The government has
an interest in policy decisions, which impact the funding of nursing home services, policies that
regulate and control access, the services that can be provided, and policies that set
expectations for quality and performance (Capitman et al., 2005b).
Medicare and Medicaid. The federal and state governments pay for nursing home
services primarily through Medicare and Medicaid programs. Medicare and Medicaid, Title 18
and Tile 19 respectively, were created as amendments to the Social Security Act of 1965. Once
these programs were in place, nursing home utilization and government expenditures grew
exponentially. The federally funded Medicare program is an insurance program for people 65
and older, some people with disabilities, and those with end stage renal failure. In brief,
Medicare pays for nursing home services primarily for rehabilitative purposes, for relatively
short periods (less than 100 days), and after a three day hospital stay. Medicare will pay fully
for the first 20 days in a skilled nursing facility if deemed necessary by a physician and if the stay
is related to recovery after the three-day hospital visit. Afterwards from day 21 to 100, the
Medicare recipient is responsible for a copayment.
In contrast, Medicaid is jointly funded by state and federal budgets. Medicaid is a public
insurance program that provides health coverage for low-income families and individuals,
which includes seniors. Each state operates its own Medicaid program that must adhere to
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matching, known as the Federal Medical Assistance Percentage, is adjusted based upon the
income level of the state with poorer states receiving a more favorable percentage (Center on
Budget and Policy Priorities, 2013). States have a great deal of flexibility to design and
administer their own programs due to the broad nature of the federal guidelines; therefore,
Medicaid benefits vary by state. In some states, Medicaid coverage includes the “Medically
Needy” in addition to the indigent population. Unlike Medicare, Medicaid is a comprehensive
health care program without a limit on the number of days. About one quarter of the residents
who enter a nursing home paying privately eventually move to the Medicaid welfare program
after exhausting their own funds (Singh, 2010). The resource limits that a person is allowed to
keep and still qualify for Medicaid varies from between $2000 and $3000, but those with
married spouses are permitted more resources to avoid impoverishment (Singh, 2010). Nursing
home residents may also be Dual-Eligibles, who are individuals enrolled in both Medicare and
120 Table 9
Medicare / Medicaid Usage and Expenditures for Long Term Care by State
Note. Compi led and Adapted from “State Health Facts,” by The Henry J. Ka iser Fa mily Foundation, 2013, Retrieved from http://kff.org/statedata/.
Spending on healthcare by both public and private sources is increasing with total
expenditures estimated to be $2.09 trillion in 2010 (See Table 9). Nearly seven percent of these
USA MN PA NC
HEALTHCARE EXPENDITURES 2010 - Private and Public
(In Millions) $2,089,862 $38,994 $97,414 $60,297
Percent Spent on Nursing Home Care 6.55% 7.25% 9.05% 6.99%
MEDICARE
FY 2011 Total Medicare Spending (In Millions) $471,260 $6,856 $23,771 $14,105 2011 Medicare Spending per Enrollee by
Residence $10,365 $8,941 $10,555 $9,741
2010 Total Number of Covered Admissions to Skilled Nursing Facilities per 1,000 Part A Enrollees
73 98 84 60
MEDICAID
FY 2012 Total Medicaid Spending
(In Million $415,154 $8,893, $20,393 $12,282,
2010 Medicaid Payments per Aged Enrollee $16,709 $16,687 $9,973
FY 2012 Percent Spent on Nursing Facilities 41.10% 24.30% 40.70% 49.80% State Share of Medicaid Spending vs Federal 36.30% 43.70% 37.80% 29.60% FY 2011 Percent of State Budgets spent on
Medicaid 16.70% 18.70% 22.70% 13.30%
FY 2011 Federal Medical Assistance Percentage (Matching Funds Percentage Adjusted for State Wealth)
50.00% 55.64% 64.71%
DUAL ELIGIBLES
2009 All duals as a Percent of Medicare
Beneficiaries 21% 18% 18% 22%
2009 All duals as a Percent of Medicaid
Beneficiaries 15% 16% 18% 17%
2009 Medicaid Spending per Dual Eligible per
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funds were spent on nursing home care alone. The government is the primary payer of long
term care services (Kaiser Foundation, 2013). In 2011, 63% of all nursing home services were
financed by Medicaid funds, and 14% were derived from Medicare. Private pay accounted for
22% of the funding. In 2011, the Federal government spent $471.26 Billion on Medicare with
7.3% of all Part A Medicare Enrollees experiencing nursing home admission. From 1990 to
2012, the percent of the Federal Budget spent on Medicare and Medicaid increased by 423%.
Total spending on both Medicare and Medicaid in the year 2012 was 31.8% of the federal
budget. Medicare represented 20.7% of expenditures, while the expense of matching state
funded Medicaid equated to 11.1%. State budgets are significantly impacted by the Medicaid
program, which will be further discussed in the state context section.
Social and Quality Based Policies. Government policies for nursing homes fall into two
broad categories of either costs or quality. However, some policies are not mutually exclusive
and reflect both categories. The nursing home industry grew directly from social policy
decisions to assist older adults who were impacted by the Great Depression through the
creation of Social Security, Medicare and Medicaid (Vladeck, 1980). With growing government
expenditures for nursing home care, policies were further issued to regulate the industry to
eliminate fraud and promote quality. What constitutes society’s view of quality has shifted
over the years. Quality can be deemed an elusive concept for nursing homes due to their
hybrid nature of providing both a welfare service and a health care service (M. L. Fennell & A. B.
Flood, 1998). Early nursing home regulations focused on structural issues of creating a safe and
appropriate setting with the capacity to delivery mostly custodial care, that was distinct from
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regulations focused heavily on elders being cared for by a professional staff and the provision of
medical care to further justify the expense of nursing home expenditures (Capitman et al.,
2005b; Vladeck, 1980). Reactions to the medical emphasis of nursing homes led to OBRA 87, in
which regulations decreed that residents must be provided with services to attain and maintain
physical, mental as well as psychosocial well-being (Koren, 2010). OBRA 87 also laid the
foundation for outcomes to become the new focus on quality through the creation of a
standard resident assessment instrument and the use of a Minimum Data Set (MDS), which is a
record of each resident’s condition (Winzelberg, 2003). Embedded in the MDS were 24 quality
indicators to aide in identifying potential problems and assess possible quality issues (Capitman
et al., 2005b). Furthermore, standardized nursing home survey procedures and deficiency tags
allow for quality comparisons. For the first time a deficiency tag in one state would
theoretically be the same all over the country (Mor, 2007). In 2005, the Centers for Medicare
andMedicaid Services began publicly reporting the quality of nursing homes nationally on the
Nursing Home Compare Website. Consumers are now provided with access to outcomes data
for individual facilities and can compare results for different nursing homes within the county,
across the state and the United States (N. G. Castle, 2005).
Economic Policies. Government spending on nursing homes is a direct and indirect
result of policy decisions. Significant policies that have increased government spending on
nursing homes include the 1960’s Kerr Mills Act in which states were permitted to decide who
qualified for medical assistance and the choice of receiving federal matching funds for their
care, as well as the 1965 passage of Medicare and Medicaid (Capitman et al., 2005b). By the
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that attempted to curtail costs. As part of the Omnibus Budget Reconciliation Act of 1980, the
Boren Amendments required that states insure Medicaid nursing home rates are reasonable
and adequate to meet the costs to maintain standards set by federal and state laws.
Effectively, the states were being held responsible for validating compliance with federal
requirements (Harkins III, 2001). Also in 1981, Medicaid waiver programs were put in place to
provide home and community based service alternatives for long-term care to be received in
other care settings besides expensive nursing homes (Shirk, 2006). Changes to reimbursements
for acute care settings resulted in a new nursing home revenue stream from Medicare. In
1983, acute care hospitals shifted from a retrospective reimbursement for Medicare services
that paid for actual costs to a prospective payment system that provides a fixed dollar amount
per episode. This fixed amount puts the onus on the hospital to be efficient with its resources.
As a result of this reimbursement policy change, hospitals found it more cost effective for
patients to recover in a nursing home versus an extended hospital stay. Thus nursing homes
began to receive more Medicare dollars to care for short term rehabilitation residents. In 1997,
the Boren Amendments were repealed and the Balanced Budget Act of 1997 was passed, which
gave states more discretion at setting reimbursement rates for Medicaid. The Balanced Budget
Act of 1997 also brought the Prospective Payment System to the Nursing Homes. In mid-year
1998, Medicare reimbursement changed from reasonable cost to a case-mix adjusted payment
under the Medicare Prospective Payment System (PPS) (Singh, 2010). Case mix ratios are based
upon the intensity of care needed as well as the number of anticipated days of care multiplied
by a rate factor derived from historic costs in the geographic area. Intensity of care is
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the anticipated level of resource use, which is then used to calculate a per-diem reimbursement
rate. In contrast, states have flexibility to determine reimbursement methods for Medicaid that
varies by state. Most states have adopted a PPS reimbursement strategy for Medicaid that
utilizes a RUGS approach or a case mix approach. States also offer varying degrees of incentives
to reward quality, encourage efficiency, or promote access (See Table 13) (Rudder, Mollot, &
Mathuria, 2009). The impact of the 1997 Balanced Budget Act was controversial with some
critics indicating the act was responsible for nursing home bankruptcies, restricted access to
healthcare and regulatory deficiencies while proponents believed the act promoted efficiency
(Konetzka, Yi, Norton, & Kilpatrick, 2004). In 1999 and 2000, additional acts were passed to
offset the severe effects of the Balanced Budget Act through temporary payment increases
(Singh, 2010). Medicare payment rates and the PPS system continue to be altered. In the fiscal
year 2011, Medicare spending on nursing homes services increased by 17%, which was
attributed to providers offering more Medicare therapy services (SEIU Healthcare, 2013). In
fiscal year 2012, CMS cut Medicare reimbursements by 11.1% which was partially due to these
expenditures (MEDPAC, March 2012). Changes to payment policies were subsequently made to
pay an overall rate instead of rewarding providers with high therapy provisions (MEDPAC,
March 2012). From 2000 to 2012, Medicare payments have outpaced providers’ costs with
margins of over 10 percent (MEDPAC, March 2012). In 2010, the average margin for
freestanding nursing facilities was 18.5%.
National Economic Context. Nursing homes are increasingly subject to market based
forces in which they must compete for residents (N. G. Castle, Engberg, Lave, & Fisher, 2009).
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as favorable funding streams for capital improvements and state polices for reimbursements.
All three case studies completed their conversion to households from 2006 to 2009. The
economic outlook for this period was marked by a slowdown in economic growth, the end of a
major housing boom, severe unemployment, a credit crunch and the greatest recession since
the Great Depression (Bordo, 2008). The gross domestic product growth rate fell to 4.10% in
June of 2009, which was the lowest point since 1948 (U.S. Bureau of Labor Statistics, 2013a).
During the years 2006 and 2007, unemployment fell to 4.4% for several months, which was the
lowest point since the previous recession in the year 2000 (U.S. Bureau of Labor Statistics,
2013b). The years 2005 and 2006 were the peak of a real estate market bubble that burst with
home values sharply falling back to values from the past decade (Parsons, 2013). For those
wishing to use the equity in their home to pay for long-term care or a move to a retirement
setting, selling a home and getting top dollar became increasingly difficult.
Notably, state incomes suffered from the loss of employment and tax revenues resulting
in reduced increases in Medicaid payment rates for long term care providers and in some
instances restrictions to services (V. K. Smith, Gifford, Ellis, Rudowitz, & Snyder, 2013). State
budget shortfalls would have had a more devastating impact if it was not for increased federal
matching funds for Medicaid received as part of the American Recovery & Reinvestment Act of
2009 (Eljay, 2010). The number of states that have implemented provider tax programs on
nursing homes to fund rate increases for Medicaid have doubled since 2004 from 20 to 40
(Eljay, 2010). In some instances, states use the tax to increase the cost of nursing home
services with the intention of drawing more Federal matching funds (NC Division of Medical
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Conversely, the long-term care industry is a direct contributor to the economy by
providing jobs and tax revenue (See Table 10). An estimated 1.8% of the workforce is employed
directly by the long-term care industry and 3.2% of the labor force is employed indirectly or by
a stakeholder for the industry. The industry pays over 60 Billion a year in combined Federal,
State and Local taxes.
Table 10
Economic Impact of Long Term Care
Jan 2011 United States Minnesota Pennsylvania North Carolina
Jobs - Direct 3,121,960 1.8% 97,860 2.9% 192,730 2.7% 102,190 2.0% Job – Total 5,445,420 3.2% 136,200 4.0% 282,690 4.0% 139,730 2.7%
Job Industry Rank 10 8 8 11
Labor Income – Direct $102.5 Bi l l i on 1.3% $2.7 Bi l l i on 1.8 % $6.7 Bi l l i on 2.1% $3.0 Bi l l i on 1.4% Labor Income - Total $205.2 Bi l l i on 2.6% $4.3 Bi l l i on 2.9% $10.5 Bi l l i on 3.3% 4.3% 2.0%
Labor Income Industry Rank 16 10 10 12
Economic Activity – Direct $183.5 Bi l l i on 1.3% $5.0 Bi l l on 1.9% $11.8 Bi l l i on 2.1% $5.5 Bi l l i on 1.4% Economic Activity – Indirect $529.0 Bi l l i on 3.7% $10.0 Bi l l on 3.8% $23.5 Bi l l i on 4.2% $10.0 Bi l l i on 2.5% Economic Activity – Industry
Rank 27 21 20 21
State/ Local Taxes $22.2 Bi l l i on $299.3 Mi l l i on $779.0 Mi l l i on $347.6 Mi l l i on Federal Tax Revenue $38.6 Bi l l i on $818.0 Mi l l i on $1,968.5 Mi l l i on $749.8 Mi l l i on Note. Long Term Ca re Defined as nursing homes, assisted livi ng, and residential care and do not i nclude government owned or hos pital based facilities. Adapted and Compiled from “Economic Impact of Long term Ca re,” by American Health Ca re As s ociation, Retrieved from http://tour.mapsalive.com/21847/page1.htm
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State Nursing Home Context
As mentioned previously, Medicaid is the primary payer source of nursing homes
services, which is a joint program between the federal government and the states. States have
discretion to operate and fund their own Medicaid program. Each state determines who
qualifies for Medicaid services, the method and rate it will use to reimburse the organization,
and any program incentives it wishes to implement to encourage access for certain individuals,
promote quality or encourage efficiency. While there are federal regulations, each state also
has different nursing home rules and regulations that dictate the operations and the design of
the physical plant. The following section briefly describes the state context for each case.
Prairie Town Home - State of Minnesota. Case one, Prairie Home, is located in the
State of Minnesota. In 2010, Prairie Home was one of the states’ 385 Nursing Facilities in which
55.7% of the residents were served by Medicaid (AHCA, 2011). The 385 nursing facilities have a
total of 32,334 beds that equates to one bed for every 20.7 persons, 65 years or older (AHCA,
2011). A national survey found that Minnesota’s Medicaid system serves both the categorically
needy (i.e. fits specific criteria) and medically needy, as well participants in a few specialized
programs (Rudder et al., 2009) (See Table 13). The program reimburses a nursing home to hold
a room for hospitalization or therapeutic purposes, and also pays for physical, occupational and
speech therapy after a specific number of treatments have occurred. From the years 2006-
2007, Minnesota offered quality incentives based upon specific measures such as staff
turnover, retention of staffing levels, and quality indicators. During 2008-2009, the state also
rewarded quality and efficiency efforts based upon a competitive process of applying for
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keep the difference of the cost and the cost ceiling (up to $3.00 per resident per day) for al l cost
centers except direct care (See Chapter 4 for more information on cost centers).
Reimbursement rates for nursing homes have been controversial in the Minnesota
legislature. A 2009 national survey of Medicaid rates reported Minnesota’s average per diem