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2012 Conference Presentation

Economics United States

7 September 2012

Moving beyond quality: strategic responses of nursing home to public report cards

Tamara R Konetzka , University of Chicago, United States
Daifeng He, University of Chicago, United States


Objective: Public reporting of quality is intended to induce quality improvement on the part of health care providers and to assist consumers in choosing high-quality facilities. However, research to date on Nursing Home Compare (a US nursing home quality “report card”) has found only small and inconsistent effects on quality and consumer choice. Why? The answer to this puzzle may lie in viewing facility incentives within the broader context of other strategic options. First, facilities may adjust private-pay price to match reported quality, which may limit increased access to higher-quality facilities. Second, where prices are set administratively, high-scoring facilities may use their scores to differentially attract more profitable Medicare residents, limiting access of less profitable Medicaid residents who may increasingly find beds only in lower-quality facilities. Our objective is to examine each of these effects empirically.

Data and Methods: We analyze a multi-year panel of Minimum Data Set (MDS) assessments for quality information and payer mix, merged with Online Survey and Certification data for time-varying facility-level characteristics and with several state databases containing private-pay price. Our sample includes all nursing homes nationally from 1999–2008 that are certified for Medicare and Medicaid (n=10, 402); this time period spans pre- and post-reporting periods. For the price analyses, we limit the sample to the three states with price data: California, Pennsylvania, and Wisconsin. We use facility fixed-effects models regressing nursing homes’ Medicaid share and private-pay price on a baseline quality score interacted with a post NHC indicator, controlling for time trends and time-varying nursing home and local market characteristics. We test both aggregated and individual measures of quality. We stratify by occupancy, as we expect price and market share effects to vary by whether or not a facility is capacity-constrained at baseline. Several alternative specifications are tested, including those that account for prior beliefs of consumers.

Results: We find that nursing homes changed private-pay price after Nursing Home Compare as hypothesized: a statistically and practically significant increase in price for high-scoring facilities (or, conversely, a relative decrease in price for low-scoring facilities). As expected, these effects were larger and more significant among capacity-constrained facilities. Furthermore, low-scoring facilities with excess capacity experienced a subsequent significant increase in market share of Medicaid residents. This is as hypothesized if facilities are interested in profitability, but would appear counterintuitive in standard approaches to market share analyses of public reporting. We conclude that Nursing Home Compare may have affected price and access more than quality. Access to high-quality nursing home care was adversely affected by the public reporting of quality, especially among Medicaid beneficiaries who are considered the least profitable.

Policy Implications: Public reporting policies need to be implemented and evaluated within the broader context of payment incentives. The overall welfare consequences of Nursing Home Compare may not be positive. The broader context of profitability will become increasingly important as we move toward value-based purchasing, where direct financial incentives for quality need to outweigh less obvious financial consequences in order to be effective.


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