Effects of Medicare Payment Changes on Nursing Home Staffing and Deficiencies

Abstract

To investigate the effects of Medicare's Prospective Payment System (PPS) for skilled nursing facilities (SNFs) and associated rate changes on quality of care as represented by staffing ratios and regulatory deficiencies. Online Survey, Certification and Reporting (OSCAR) data from 1996-2000 were linked with Area Resource File (ARF) and Medicare Cost Report data to form a panel dataset. A difference-in-differences model was used to assess effects of the PPS and the BBRA (Balanced Budget Refinement Act) on staffing and deficiencies, a design that allows the separation of the effects of the policies from general trends. Ordinary least squares and negative binomial models were used. The OSCAR and Medicare Cost Report data are self-reported by nursing facilities; ARF data are publicly available. Data were linked by provider ID and county. We find that professional staffing decreased and regulatory deficiencies increased with PPS, and that both effects were mitigated with the BBRA rate increases. The effects appear to increase with the percent of Medicare residents in the facility except, in some cases, at the highest percentage of Medicare. The findings on staffing are statistically significant. The effects on deficiencies, though exhibiting consistent signs and magnitudes with the staffing results, are largely insignificant. Medicare's PPS system and associated rate cuts for SNFs have had a negative effect on staffing and regulatory compliance. Further research is necessary to determine whether these changes are associated with worse outcomes. Findings from this investigation could help guide policy modifications that support the provision of quality nursing home care.