Restructuring in response to case mix reimbursement in nursing homes: A contingency approach

Background: Resident-based case mix reimbursement has become the dominant mechanism for publicly funded nursing home care. In 1998 skilled nursing facility reimbursement changed from cost-based to case mix adjusted payments under the Medicare Prospective Payment system for the costs of all skilled nursing facility care provided to Medicare recipients. In addition, as of 2004, 35 state Medicaid programs had implemented some form of case mix reimbursement. Purpose: The purpose of the study is to determine if the implementation of Medicare and Medicaid case mix reimbursement increased the administrative burden on nursing homes, as evidenced by increased levels of nurses in administrative functions. Methodology/Approach: The primary data for this study come from the Centers for Medicare and Medicaid Services Online Survey Certification and Reporting database from 1997 through 2004, a national nursing home database containing aggregated facility-level information, including staffing, organizational characteristics and resident conditions, on all Medicare/Medicaid certified nursing facilities in the country. We conducted multivariate regression analyses using a facility fixed-effects model to examine the effects of the implementation of Medicaid case mix reimbursement and Medicare Prospective Payment System on changes in the level of total administrative nurse staffing in nursing homes. Findings: Both Medicaid case mix reimbursement and Medicare Prospective Payment System increased the level of administrative nurse staffing, on average by 5.5% and 4.0% respectively. However, lack of evidence for a substitution effect suggests that any decline in direct care staffing after the introduction of case mix reimbursement is not attributable to a shift from clinical nursing resources to administrative functions. Practice Implications: Our findings indicate that the administrative burden posed by case mix reimbursement has resource implications for all freestanding facilities. At the margin, the increased administrative burden imposed by case mix may become a factor influencing a range of decisions, including resident admission and staff hiring.