Acute Care Rehabilitation
Nursing homes provide a cost-effective way to enable patients with injuries, acute illnesses or postoperative care needs to recover in an environment outside a hospital. When these patients are admitted from a hospital, Medicare will cover the cost.
In 1997, at any given time, only about 9% of nursing home residents were being covered for their stay by Medicare rehabilitation, and their average stay was only 23 days. But in any given year, a large number of acute-care Medicare patients as well as some private-pay and private insurance-pay will cycle through US nursing homes on their way to recovery.
For every 100 elderly patients in a nursing home in a given year, 38 will recover or stabilize so they can be discharged. Of course, those leaving will be replaced by about 38 new patients needing care.
Holding Facility for Chronically ill and Terminal Patients
(Typically called long-term care patients)
About 91% of the 1,650,000 US nursing home residents are over the age of 65. Most are in care because of physical needs that require help from the nurses, aides or physical therapists on a nursing home staff. These residents may suffer from a wide array of physical or mental disorders or they may simply be feeble and unable to move about, bath themselves or provide their own meals.
Many of these nursing home residents are considered long-term care patients -- they will never recover or stabilize to the point where they can take care of themselves and go back home. These people will either die in a nursing home or be discharged to a hospital where they will die or return to a nursing home or hospice to die. For every 100 elderly patients in a nursing home in a given year, 35 will die and another 37 will be admitted to a hospital where they may die, recover or return. The average stay for elderly patients who die in a nursing home is just shy of 2 years.
The first chart below shows that virtually all residents of nursing homes need assistance with activities of daily living. In addition, many of these people, whether they are short-term or long-term residents, have medical needs as well. Recent studies on nursing home populations reveal that both the age of residents and their need for medical help is increasing. It seems that the elderly are finding alternatives to the nursing home until their health gets to a point where the nursing home is the only option for care. This trend probably explains why the number of nursing home residents has not increased significantly over the past 10 years whereas the number of elderly has increased remarkably over the last decade.
From the second chart below, note that over half of all nursing home residents are 85 years and older. The number of people who survive beyond age 85 is expected to increase dramatically over the next 20 years. It used to be a novelty for someone to survive to age 100 and oftentimes that person was recognized in the community. Also, invariably, that person being recognized was in a nursing home. It is not so rare to survive beyond age 100 now and so few people are being recognized for that event. Surveys are finding that the older nursing home residents require a significant amount of care for help with activities of daily living and with severe medical problems.
Source: 2005 statistical abstract of the United States
Source: 2005 statistical abstract of the United States
The data below were taken from the 1999 National Nursing Home Survey. Although analysis of the data to determine the average stay for a temporary rehabilitation patient versus a long term care patient is not entirely possible, we can get a good idea from the average length of stay for current residents versus length of stay for discharged residents during the year. Since the majority of discharges during the year will be short-term patients we can assume that many of these were in care for rehabilitation. Many of the patients who are currently in care have probably been there at least a year or more and are most likely to be long-term care patients. According to the data the average length of stay for current residents is 2.44 years and for discharged residents is 272 days. But we also know from data from the CMS that the average stay for a Medicare rehabilitation patient is about 23 days.
The cost of a nursing home depends a great deal on where it is located in the country and whether it attaches a surcharge for private paying patients versus Medicaid and Medicare patients. The Internet is replete with nursing home search services and prices in any given area with specific nursing homes can easily be determined. But remember this is for private pay services.
Hospital Model of Pricing
Nursing homes look very much like hospitals. Staff are housed in accessible nursing stations. Residents live in utilitarian, hospital-like rooms with little or no privacy and they sleep on hospital beds and are usually referred to as "patients" by the staff. Hospital pricing models are also used. Residents are charged daily flat rates for semiprivate or private rooms just like a hospital. Extra services and supplies are added to the bill. This pricing model assumes that all residents require the same supervision and care. Of course this is not true.
A lot could be done to improve the current system. For example, if family or friends were to help in the care of loved ones, these services could be deducted from the bill. A number of residents are also capable of helping with the care of fellow residents or they might help with the facility services such as cleaning, food preparation, social needs, laundry and so on. These cost savings could be passed on to all residents.
State and Federal governments pay about 70% of nursing home costs and for about 85% of all residents the government pays part of or all of their costs. Because the government pays such a large portion, nursing homes structure their care delivery system around the government payment system.
Government reimbursement is based on nursing hours and aide hours per patient, plant costs, wages, utilities, insurance, ancillary services, etc. and basically follows a hospital model. Because government programs typically are burdened with massive stationery inertia, the current pricing model will be around for a long time.
The Effect of Medicaid and Medicare Reimbursement Rates on Private Pay Rates
Medicare covers about 12% of private nursing home costs while Medicaid covers about 50%. The Veteran's Administration nursing home operations bring total government support of nursing home costs to about 70% of the total. Such a large reliance on government support has made nursing homes vulnerable to vagaries in state and Federal reimbursement policies towards nursing homes.
Prior to 1997, Medicare reimbursements to nursing homes were based on actual costs submitted on each patient. The Balanced Budget Act of 1996, forced Medicare to phase in a prospective payment system of reimbursement which is currently now fully implemented. Payments are still made for each patient but are based on pricing formulas determined by the intensity of care needed (so-called case-mix ratio) as well as the number of anticipated days of care multiplied by a rate factor derived from 1998 historic costs in that geographic area. This is prospective payment. As a rule, nursing homes claim they are losing money with this payment system.
Many nursing homes also claim that Medicaid reimbursement is not paying their actual costs as well. Medicaid reimbursement is carried out at a state level. Generally the States employ some rather convoluted and arcane rules to reimburse nursing homes. Most states reimburse with a prospective payment system like Medicare but a few states reimburse actual costs up to certain predetermined statewide maximum amounts. Some states pay directly, others pay through privately-contracted managed care administrators. Medicaid reimbursement to nursing homes is not uniform from state to state. Some state nursing home associations claim that 85% of their member nursing homes are not meeting costs with Medicaid. In other states nursing homes may be faring better.
Medicare and Medicaid reimbursement have a direct impact on the daily bed rates of private-pay residents. These are residents who are paying out-of-pocket for their own care. They may be spending money from their own income and assets or their family may be pitching in as well. Many of these people are going through Medicaid spend-down--depleting assets until they qualify for Medicaid. If the nursing home is losing money on government reimbursement it may be charging private-pay residents higher daily rates to make up the difference.
But one should not assume this is always the case. At least 2 states, Minnesota and North Dakota , prohibit nursing homes from charging more than the Medicaid reimbursement rate. In addition, not all homes lose money on government reimbursement. These facilities may be charging the same for all residents. Finally, although most states prohibit nursing homes from charging private-pay less than the Medicaid reimbursement rate, in those states that allow it, private-pay residents may be paying less than with Medicaid.
The Effect of Occupancy and Bed Ratio on Prices
Occupancy ratio is the number of occupied beds divided by the number of available beds. For most facilities, an occupancy ratio in the range of 90% to 95% would be considered fully occupied. Most facilities would be hampered in operation if 100% of the beds were filled. Occupancy varies from state to state and region to region. Pricing based on occupancy is a direct reflection of the law of supply and demand. If beds are in demand, as with high occupancy, the nursing home can refuse the fixed payment, government reimbursed residents in favor of private-pay patients. With high demand, private-pay residents pay more and the nursing home gets more profit. On the other hand in areas of low occupancy, nursing homes have to accept more low-paying Medicaid residents and private-pay rates will be competitive because buyers will bid one facility against another for their services.
Nationally, occupancy has shown a downward trend since 1990 and is currently about 87%. That should work towards keeping nursing home rates down. But it's not consistent from state to state. Some states have occupancy ratios in the 70s while others like New York are in the high 90s. As expected, New York has very high private-pay room rates whereas the low-ratio states have lower private-pay rates.
Bed ratio is the number of beds per 1,000 residents aged 65 to 84 and 85 and older. Nationally bed ratios are at about 60 beds per 1000 for age 65 to 84 and 453 beds per 1000 for 85+. As a general rule, a growing bed ratio will over time cause low occupancy rates.
Many states feel it is in their best interest to maintain a stable bed ratio by restricting the number of available beds region by region in order to keep occupancy high. The most common way they do this is by forcing all new or expanding facilities to submit a certificate of need (CON). A CON must meet bed ratio standards and be approved before construction may start.
One argument for restricting beds is States believe they need to have a financially strong nursing home industry to guarantee good quality care and to assure a future supply of beds. They do this by artificially limiting supply thus increasing demand to insure profits for the industry. Another goal in restricting the current supply of beds is to force money that would be spent on Medicaid nursing home beds to be spent instead on alternate care services for care recipients. Services like home care, assisted living and adult day care. As expected, states that restrict the availability of beds generally have higher private-pay rates.
Medicare is the government health insurance plan for all eligible individuals age 65 and older. Because of its universal availability almost everyone over age 65 in this country is covered by Medicare. There are about 40 million Medicare beneficiaries nationwide.
Medicare will pay for 20 days of a skilled nursing care facility at full cost and the difference between $114 per day and the actual cost for another 80 days. Private Medicare supplement insurance usually pays the 80 day deductible of $114 per day, if a person carries this insurance and the right policy form. However, Medicare often stops paying before reaching the full 100 days. When Medicare stops, so does the supplement coverage. The average paid Medicare nursing home stay was 23 days in 1997, only 1/5 of the allowable time. Nationwide, Medicare paid 12% of nursing home receipts in 1998.
To qualify for Medicare nursing home coverage, the individual must spend at least 3 full days in a hospital and must have a skilled nursing need and have a doctor order it. The transfer from a hospital must occur within a certain time period.
There is a misconception that Medicare automatically covers up to 100 days of all nursing home stays. In reality, 100 full days of Medicare coverage is not that likely . Not all nursing home admissions come from a hospital--a prerequisite for Medicare coverage. Note from the chart below that less than half of all nursing home admissions are from the hospital. Also, a hospital stay resulting in nursing home care does not automatically qualify for Medicare coverage. The stay may have been less than 3 full days or there may not be a skilled need. And as has already been pointed out, even when a person qualifies for Medicare coverage it is likely to be much less than 100 days.
Source: 2005 statistical abstract of the United States
Medicaid is a welfare program jointly funded by the federal government and the states and largely administered by the states. In 1998, Medicaid paid for 46.3% of the $88 billion received by all US nursing homes. Although the bias is only to cover eligible patients in semiprivate rooms in nursing homes, a recent court decision is forcing the States to consider more Medicaid funding for home care and assisted living. To receive a Medicaid waiver for alternative community services, the patient must first be evaluated for 90 days in a nursing home.
To qualify for Medicaid a person must spend-down his or her liquid assets to $2,000.
There are numerous horror stories about people losing their house and cars to Medicaid. But these tales are unfounded. A healthy spouse can keep the car and house as well as a share of liquid assets. If the healthy spouse eventually needs Medicaid, after she dies, Medicaid recovery is supposed to recover its costs by establishing claim against equity in the home. Some states do a good job of recovery but most don't.
Insurance is an alternative source of funding for long term nursing home care. From virtually nothing 10 years ago, insurance paid 5% of nursing home receipts in 1998. This percentage is increasing every year. The government is also sending a clear message it wants private insurance to play a larger role. This began with the recommendation of the Pepper Commission in 1992 and continued with the HIPAA legislation in 1996 and on to the offering in 2003 of long-term care insurance for federal workers, military, retirees and their families.
There are several bills now pending in Congress allowing full deduction of premiums and the pass-through of premiums in cafeteria plans. These tax breaks are meant as an incentive for the purchase of insurance.
Source: 2005 statistical abstract of the United States
How Do You Select a Nursing Home for Long-Term Care?
Choice Made by Hospital Discharge Planner
All hospitals have a discharge planning section, one responsibility of which is to assess and arrange for post-hospital care if necessary. If the discharge planner determines a need for nursing home care, then he or she usually chooses the appropriate facility with consent of the patient and family. The planner also arranges for Medicare. As a prospective purchaser you do not have agree with or accept the planner's decision and you can offer an alternative location if you feel more comfortable. The facility however has to be a skilled nursing provider and the doctor providing care must be available on a 24 hour emergency basis.
Many nursing home admissions are not made directly from a hospital so the potential resident or most likely her family must choose a facility among perhaps dozens in their area. Selection of the appropriate home is important especially in light of the proliferation of abuse and neglect problems. A valuable resource is a good referral from a friend or relative who have had someone close to them in a nursing home. Make sure they are familiar with the quality of care in the facility they are recommending.
It's a good idea to call all the facilities in your area and ask for bed rates. Also ask about staff turnover, age of the facility, whether the rate includes extras such as diapers and personal items, whether it is a chain, locally owned or nonprofit and whether they offer the level of care you need. You can eliminate a number of facilities before you take the next step of an inspection tour.
Amenities Are Nice, But...
The newness of a facility and the amenities say nothing about the quality of care. Nor is a high daily bed rate always an indicator of better care. Many older facilities have lower fixed costs and they may be able to give quality care at lower rates even if the surroundings are not so spiffy. The staff and administration are key to a quality nursing home stay, not the physical surroundings. A good indicator of quality is how long staff members have been with the facility. Long tenures usually mean job satisfaction. These people probably enjoy working with residents and are likely to have a good rapport with their charges and dispense high quality care. Always ask about tenure and turnover rates.
There are numerous checklists and evaluation helps on the internet to assist you in the selection of a nursing home. Here are some samples:
PROBLEMS FACING NURSING HOMES
The majority of nursing home income comes from government reimbursement. The industry claims that many of its nursing homes are losing money on government payments causing yearly net business losses. As an example, in 2000, 10 national chains sought chapter 11 restructuring, citing inadequate government payments as the reason for seeking bankruptcy protection.
For those homes that make profit, there's not margin enough for improving infrastructure or hiring more or better qualified staff to improve quality of care. Quality of care eventually suffers with inadequate income. On the other hand, critics contend the current revelations of poor care with many nursing homes across the country stem not from lack of income but from greedy owners not willing to apply profits to improvement in care. The national chains, in particular, are accused of retaining profits to bolster stock prices in an effort to fund acquisitions.
A recent report from the Government Accounting Office cites widespread understaffing by nursing homes both in levels of nurses and certified nurse's assistants. Staffing in these cases is below government-recommended adequate standards. Recently states such as California have mandated higher staffing ratios for hospitals and skilled nursing homes. But in most cases there is not additional money to cover the cost of more staff. So mandated staffing ratios will probably have little effect on the problems facing nursing homes and may actually increase their problems.
Turnover of aides
There's no question that tight labor markets over the past decade have made it difficult to recruit and retain workers. But turnover of qualified aides is so high, it's hard to even retain any experienced people at all. After all, why would anyone pay for a 6 week CNA course, then hire on for $8.50 an hour with no benefits, in order to empty bed pans and change diapers or risk permanent back injury from lifting patients. Nursing homes claim they can't afford to pay for the higher level of wages and benefits necessary to retain aides who will stay around for a while.
Shortage of nurses
Next is the problem of nurses. There is currently a nationwide shortage of nurses. Nursing homes are willing to pay the salary to attract nurses but in many areas there aren't enough nurses to meet demand. Nursing homes, as well as hospitals are using innovative work schedules to meet staffing requirements but in many cases, nurses are overloaded with too many patients. In other cases, less qualified workers are substituting for nurses. These shortages and high turnover affect the quality of care that a nursing home can provide.
Elder Abuse and Lawsuits
It shouldn't come as a surprise with the problems of funding and staffing that reported incidents of patient neglect and abuse are on the rise. Of particular concern is the more frequent occurrence of abuse. Abuse is not only just physical assault or threats but it can also be such things as improper use of restraints, failure to feed or give water, failure to bathe, improper care resulting in pressure sores or allowing a patient to lie too long in a soiled diaper or bed linen. And lawsuits are increasing in number.
As a result of long-standing complaints with the entire health industry, 36 states have passed "patients bill of rights" legislation. With regard to nursing homes, 31 of these states' laws allow for bringing suit for violating patients rights.
There is no requirement under these laws to show negligence, so something as routine as a change in how constraints are used might lead to a violation of rights. For example suppose a nursing home changed its policy to allow bed rails to be constraints for agitated patients. Suppose a patient climbed over the rail, fell and injured himself severely. This application of constraint might be viewed as violating that patient's rights.
Overall, the number of nursing home lawsuits are rising but in the states of Florida and Texas , they are reaching crisis proportion especially for deep-pocketed national chains who seem to be the principal targets. The Florida Bill of Rights allows for nursing homes to pay uncontained attorney's fees, it allows for unlimited punitive damages and it establishes a liberal statute of limitations. It appears Florida law firms have taken advantage of the more liberal rules. In 2002, Florida 's 700 nursing homes collectively faced $1 billion in lawsuits from claims totaling 4 times the number of claims in all other states. About 20% of Florida 's nursing homes have filed for bankruptcy protection.
There is great concern at the Federal and state level to control abuse. So far, aside from proposing tougher laws to penalize the industry, there appears to be little effort in finding a way to improve the nursing home system of care delivery.
Insurance and Compliance Costs
As a result of lawsuits, liability insurance costs for nursing homes are rising. In Florida and Texas , only 1 insurance carrier is even willing to underwrite the risk. Rates have increased in some cases 1000% and might cost as much as $6,000 per bed per year. Likely, Medicare and Medicaid reimbursement will not keep pace with these extraordinary costs and nursing homes will have to face new cost restraints in addition to the problems they already face.
Nursing homes also complain that a major deterrent to the available time nurses can devote to care is the inordinate amount of time filling out Federal and state paperwork. Many nurses claim they are neglecting their patients in order to get the paperwork done. But, without these time-consuming reports the facility cannot receive its funding.
Future Level of Care and Access to Care
Medicaid covers almost half of all nursing home costs. Medicaid is the fifth largest expenditure for the Federal Government behind national debt, defense, social security and Medicare. And, Federal Medicaid grants are growing so fast, they will soon surpass Medicare spending. At the state level, after applying state funds to Federal matching funds, Medicaid is usually the second biggest chunk of state budgets after education. The General accounting office estimated in 2004 that 35% of Medicaid payments went for long-term care services.
With a growing trend for more and more elderly people to rely on Medicaid, states will have to deal with a future lack of funds to cover all Medicaid costs including long-term care . This may involve cutting back on services, tightening rules for access to Medicaid, asking the Feds for more money, raising taxes, changing rules and becoming tougher on recovery of recipient assets or more likely a combination of all of the foregoing tactics. Quality of long term care and access to Medicaid will likely suffer as demand for Medicaid increases.
POSSIBLE SOLUTIONS FOR SOLVING NURSING HOME PROBLEMS
Let the Problem Fix Itself
It can be argued that the current problems are temporary. First, The shift to Medicare prospective payment is causing temporary dislocation of funds as nursing homes adjust care around the new system. Eventually as the dust settles, facilities will learn how to make money with PPS without sacrificing care. Next, State Medicaid programs will continue to tweak bed ratios and payment systems to help strengthen the industry. In addition, the tight labor market for aides and nurses will eventually correct itself. Trained employees will stick around longer and quality of care will improve. As a result, neglect and abuse incidents will decline in number.
Another positive nonintervention incentive is a growing trend to publish deficiency ratings for nursing facilities. Using this knowledge, consumers can avoid poorly-run nursing homes and eventually market forces will require bad facilities to "clean up their act" or shut down. Despite the possibility for the problem self-correcting, many critics are not willing to wait nor are they optimistic for the future of nursing home care. They want the government more involved.
Extend Government Control
Government could extend more control in several stages of involvement. A first stage might involve the Federal Government unifying the Medicaid reimbursement process by applying the same rules throughout the country. Some states do a poor job of handling Medicaid reimbursement, other states do a fair job and others do a good job. Federal equalization might make it more fair for everyone.
Part of this first stage of Federal involvement might also be codifying national staffing ratios and providing work or study or benefit incentives for nursing home workers. Some states have inadequate staff ratios or work related incentives for nursing homes while some states have stringent ratios and progressive worker incentives. Federal equalization could help with deficient states and help raise levels of care in those states.
A more involved stage of control might be actual Federal or State management of nursing facilities. The government could lease facilities from current owners. The advantage of this approach would be central management for all facilities, standard labor policies with employees able to transfer from unit to unit to help equalize misallocation of labor and one pool of money to allow redirection of funds to deficient areas of the system. Nonprofit nursing homes would be exempt from this plan since they are currently less dependent on government funding and because much of their support comes from their church or nonprofit organization.
Another part of tighter government control could be implementation of a national nursing home insurance plan much like Medicare Part A. The plan would include deductibles, co-payments and spending limits just like Medicare. Premiums would be paid jointly by beneficiaries, States, Federal Government and employers. Beneficiaries could also purchase additional, private, supplemental, long-term care insurance plans much as with Medicare supplement plans. And like Medicare, these supplements could fill holes with deductibles, co-pays and benefit ceilings. Supplements could also extend coverage to include home care, assisted living, adult day care and hospice. This national insurance plan would finance the government operation of nursing homes.
Create a Better Environment With Holistic Care Strategies
A number of people in the nursing home industry feel that changing the caregiving environment is the right approach. A friendlier, supportive environment between staff and residents produces happier employees, healthier residents, less worker turnover and overall generally better care. To do this requires abandoning part or all of the hospital model of nursing home care.
The hospital model is easy to administer because results can be quantitatively measured. Quantitative measurement simplifies accounting because it allows cost and reimbursement to be tied to performance standards. So-called case-mix pricing is based on measures of the time aides and nurses spend per patient. The amount of time spent caring for and assisting residents and dispensing medication is carefully documented for each resident. Under this system, sometimes patients are regarded as a commodity rather than a human being.
It's not to say that administrators and workers don't care about the emotional and social needs of their charges and so all facilities have TVs, exercise activities, reading rooms, craft projects, field trips and so forth. But these activities are usually designed and implemented by staff with little or no input from residents. These activities are planned so that they can be measured in time spent per resident in order to remain consistent with the hospital model. The staff is patronizing and centered on a day care philosophy of keeping people busy but ignoring their needs for self direction and self worth.
In essence, the hospital model results in a facility where residents are simply waiting to recover and leave or they are being entertained in a day care environment awaiting their eventual death. Nursing home residents lose the opportunity to be an influence on their environment which is so vital to our purpose as human beings.
Because of this forced detachment, many nursing home workers are only punching time clocks whereas closer involvement in "humanizing" the environment would probably be a strong incentive for many aides to stick with their jobs and not seek work elsewhere. With better retention, quality of care would improve and residents would be healthier. Studies show that this outcome is indeed the case with nursing homes that have tried to introduce this kind of care system.
A holistic or "whole person" approach to nursing care provides an atmosphere where residents feel they have a reason to keep living. Dignity and self worth replace despair, loneliness, boredom and helplessness. Workers have a sense of empowerment and feel like they are "making a difference". But to make the system work requires employees to accept nontraditional work roles not learned under the hospital care model. It also requires more effort on the part of administrators and workers to make it work. Additional staff meetings, encounter groups and training sessions are a necessary requirement.
The Eden Alternative
One successful example of this shift to holistic care is the Eden Alternative. Since 1992, over 250 nursing facilities in the US and Canada have "edenized" and new ones join just about every month.
The Eden Alternative had its beginnings in 1991 in Chase Memorial, a small-town nursing home in upstate New York . The new medical director, Dr. Bill Thomas and his wife Judy, felt they had a better vision of what a nursing home should be and they set about to put their plan in action. With more than 200 birds, four cats, two dogs, dozens of plants, a child care center, a garden and a regular schoolchildren visiting program, Bill and Judy created what they called a "holistic" environment.
Dr. Thomas designed the program to defeat what he calls the three demons of nursing home care: loneliness, helplessness and boredom. By empowering residents to care for animals, plants, children and even each other he gave these people dignity and purpose. In the process, residents began showing marked improvement in their need for care. The need for restraints declined, drug bills diminished, death rates and incidence of illness declined and formerly stoic patients began to communicate. Workers as well were given new freedom to set their own schedules and to specialize in newfound activities such as caring for pets. Employee morale soared producing an improved work ethic.
Converting an existing nursing home to an Eden Alternative is not that costly. The challenge is changing entrenched mindsets and eliciting a firm commitment from owners, administrators and staff to make it work. If it were easy, we would probably have many more than 250 facilities doing it after 10 years.
Recently, Dr. Thomas has further extended his reform through the "Green House Project", a new approach to deinstitutionalize care through newly constructed, communal living environments. Click here for more about Green House.
"Edenizing" only works with facilities that rely less on government funding. These are typically private-pay only or nonprofit facilities. The reason for this is that government funding does not reward the facility for residents improving in health or taking fewer medications. On the contrary, government reimbursement is based on sicker residents receiving more care and lots of medications.