Medicaid Reimbursement and Nursing Home Quality of Care Revisited

Early research on how Medicaid reimbursement impacted quality studied a period when demand for services was greater than the supply of beds, a situation referred to as excess demand.  Using facility specific reimbursement rates, Nyman (1985;1988) found higher reimbursement decreased quality, as measured by severity weighted deficiency citations in geographic areas suffering from excess demand, but found no effect of reimbursement in geographic areas not suffering from excess demand.  More recently, the literature has moved to using average state reimbursement rates to identify the effect of Medicaid on quality. These studies generally find that higher Medicaid reimbursement rates lead to higher nurse staffing levels (Cohen and Spector, 1996; Grabowski, 2001a; 2001b; 2004; Harrington et al., 2007), but the results on resident outcomes is ambiguous. Some studies find higher reimbursement does not statistically affect resident outcomes (Cohen and Spector, 1996; Grabowski, 2001a; 2001b), others find small improvements (Grabowski, 2004; Intrator and Mor, 2004; Bowblis, 2012), and two studies find worse quality in terms of physical restraint use and feeding tube use (Teno et al., 2008; Mor et al., 2011).

In this study, we examine the relationship between Medicaid reimbursement rates and quality of care provided by Ohio nursing homes for the time period of 2006-2010, being the first paper to focus on facility-specific rates in nearly 20 years.  Initially, we combine data on facility specific reimbursement rates with a series of quality indicators to examine the relationship between reimbursement and quality.  To study how reimbursement changes could affect quality we next examine the impact of Ohio reimbursement reforms implemented over a four year time period.  Our study coincides with a period when Ohio did not make other significant changes to other NH policies, such as minimum nurse staffing requirements.

Baseline reimbursement rates show significant variation across the state.  A review of baseline quality and changes in quality over the study period found that higher Medicaid reimbursement rates result in higher nurse and support staffing levels. However, there were no consistent impacts on quality outcomes. Results were not found to vary in geographic areas with excess demand.  Consistent with the literature from the past 15 years, Medicaid reimbursement is found to increase staffing levels, but has limited effect on non-staffing outcomes, demonstrating that a better understanding of the relationship between reimbursement and quality is needed.