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Overview of Nursing Facility Capacity, Financing, and Ownership in the United States in 2011

Introduction

Nursing facilities are a major provider of long-term care services in the United States. These facilities provide medical, skilled nursing, and rehabilitative services on an inpatient basis to individuals who need assistance performing activities of daily living, such as bathing and dressing. Nursing facilities are one part of the long-term care delivery system that also includes home and community based services, but their relatively high cost has led them to be the focus of much attention from policymakers. Nationally, spending on nursing facilities across all payers totaled $143 billion in 2010.1 The majority of this spending was financed by Medicaid, as most families cannot afford the high cost out-of-pocket and Medicare benefits for these services are very limited.

With the aging of the population in the United States, more individuals will need long-term care services in the future, provided in both the community as well as in facilities. By 2040, 20 percent of the U.S. population will be 65 or older, compared to 13 percent in 2010.2 Beneficiary preference as well as cost and quality concerns have driven states to shift long-term care services provided in facilities into the community to reduce Medicaid spending.3 However, as demand continues to increase for long-term care, the characteristics, capacity, and care quality of facilities remain subjects of concern among consumers and policy makers.

This brief examines data from the Online Survey, Certification, and Reporting (OSCAR) system, a database that contains detailed information on Medicaid and Medicare certified nursing facilities. It builds on previous analysis of the OSCAR system,4 and looks at the most current year of data, 2011, as well as trends going back to 2006. The brief discusses how data on nursing facilities are collected and examines a variety of facility characteristics such as facility ownership and number of beds for all 50 states, DC, and the U.S. For additional information on the OSCAR system and methods underlying this analysis, see Appendix 1.

How is data on nursing facilities collected?

Nursing facilities are subject to regulation on both the state and Federal level to ensure that quality care is provided to residents. Following studies done on the quality of care in nursing facilities by the Institute of Medicine in the 1980s, Congress passed the Nursing Home Reform Act (OBRA, 1987). The Act was passed with the goal of ensuring that residents receive quality care and certain services to achieve well-being.5 Under the regulations stemming from OBRA, facilities must comply with certain provisions to obtain certification to receive payments from Medicaid and Medicare. These provisions include, among other things, regular resident assessments to be used in care planning and surveys to ensure compliance with Federal regulations related to staffing and quality of life.

After an initial survey by a state survey and certification agency, facilities are surveyed at least every 15 months to continue certification. Surveys may also be conducted more frequently if needed to determine if facilities have corrected deficiencies, if there are substantial changes in management or reorganization, or if there were complaints related to substandard care. These surveys involve on-site inspections for compliance with about 170 federal regulatory requirements which includes observation, review of facility and resident records, and interviews with residents, staff, and family members.  Data from the surveys are compiled to create the federal OSCAR database.

OSCAR contains data on facility, staff, and resident characteristics. The data also contain information on deficiencies related to quality in facilities.  System checks are in place to protect against biased surveys and incorrect deficiencies, but under-reporting may still occur. In addition, since each state uses its own surveyors, state differences should be interpreted with caution as inter-survey reliability may be a factor in the reporting on the differences in quality of facilities.

What is the current capacity of nursing facilities?

The number and capacity of facilities is critical as sufficient capacity in both institutional and community-based settings are needed to accommodate long-term care user preference. In 2011, 15,465 facilities were surveyed in all 50 states and DC (Table 1).6 These facilities contained a total of 1,646,302 beds and served 1.4 million residents at any given time (Table 2). The number of facilities and residents remains steady from previous years (Figure 1). States vary on the number and size of facilities, which may be a result of different levels of need across states as well as some states shifting more care towards home and community-based settings.

Slide1_figure 1OSCAR RL

Figure 1: Number of Nursing Facilities in the United States, 2006-2011

Facilities across the U.S. averaged 108.5 beds per facility in 2011. Facility size has been correlated with quality of care, with research showing that larger facilities often deliver poorer quality of care as compared to smaller facilities.7  States vary greatly in average facility size, ranging from an average of 186.0 beds per facility in New York to 42.5 beds per facility in Alaska (Figure 2 & Table 3).

Slide2_figure 2 OSCAR RL

Figure 2: Average Number of Certified Nursing Facility Beds Per Facility by State, 2011

Occupancy rates are an indicator of capacity as well as the financial health of the facility. A facility occupancy rate is calculated by dividing the number of residents in a facility by the number of certified beds (excluding residents in uncertified beds). In 2011, the overall occupancy rate nationwide was 83 percent, but rates varied dramatically across the country with six states having less than 70 percent occupancy while 10 states had more than 90 percent occupancy (Table 4). Overall occupancy rates have declined slightly in the past five years (from over 85% in 2006), despite a slight increase in the total number of residents; these trends may indicate an excess of beds in states with lower occupancy rates.8

How are nursing facilities financed?

Licensed nursing facilities must be certified to be able to accept Medicare or Medicaid residents, but participation in these programs is voluntary. Medicaid and Medicare have separate certification requirements, and facilities may be certified for either one or both. In 2011, almost all facilities (95%) were certified for both Medicare and Medicaid (Table 5).

Slide4_Figure 3 OSCAR RL

Figure 3: Percentage of Nursing Facility Residents by Primary Payer Type, 2011

Medicaid was the primary payer for over 63 percent of nursing facility residents. Medicaid may become the primary payer of nursing facility services once residents have exhausted or have spent down personal assets paying for care. In addition to Medicaid, 22 percent of residents were private pay, and Medicare accounted for the remaining 14.5 percent of residents (Figure 3). Medicare covers short-term nursing facility stays for residents following a hospital stay, while private pay residents are paying for their care directly out of pocket. Since 2006, the percentage of residents paid for by Medicaid has declined somewhat from 65.4 percent.

Payer mix in facilities is of interest due to research that demonstrated a relationship between high Medicaid occupancy and poor quality in nursing facilities.9,10 The decline in the number of Medicaid residents relates to both the shift from institutional-based care to the community as well as a desire for facilities to increase the share Medicare and private pay residents due to the historically low reimbursement rates from Medicaid (Table 6).11

Not all states have similar patterns of residents and payers. For example, Medicaid pays for 47 percent of all residents in Iowa, while private sources cover an additional 45 percent of residents. In contrast, in states with similar population sizes, such as Alaska and DC, Medicaid pays for over 80 percent of residents in nursing facilities.

Who owns nursing facilities?

Nursing facility ownership remains a central focus of research and policy given debate over its relationship with quality of care.12 Research indicates that for-profit, or proprietary, facilities may have poorer performance on quality measures or lower staffing levels than non-profit or government facilities.13 Nationally, 68 percent of facilities are for-profit (Figure 4, Figure 5), but this share varies dramatically by state (Table 7). In some states, including Arkansas, Oklahoma, and Oregon, over 80 percent of facilities are for-profit, while in Minnesota and South Dakota, more than half of facilities are owned by non-profit entities. Government facilities are a small percentage (6%) nationally, but in states like Hawaii and Nebraska, these facilities are more prevalent.

Slide5_Figure 4 OSCAR RL

Figure 4: Facility Ownership and Affiliation, 2011

Slide3_figure 5 OSCAR RL

Figure 5: Percentage of For-Profit Nursing Facilities by State, 2011

In addition to ownership, affiliation of facilities has also been linked to staffing levels and quality. Over half of all facilities are owned by chains or corporations that own multiple facilities (Table 8). Chains are typically for-profit entities and have been associated with poor staffing and lower quality.14 Chain ownership has increased in the last five years, leading policy makers to call for more transparency and additional oversight.15 Hospital-based facilities make up a small portion of facilities in the U.S., but in certain states, they account for over a quarter of all facilities.

Discussion

Over the last five years, facility characteristics and capacity have remained steady, but with the aging of the population, the demand for long-term care services is increasing. Research has shown that a majority of people over the age of 65 will need long-term care services for an average of three years, and 20 percent of people will need more than five years of services.16 The percentage of the population over the age of 65 is expected to increase as the “baby boom” generation ages, and specifically the number of people 85 and older are expected to grow from 5.8 million in 2010 to 19 million in 2050.17 The next few decades will require states and policy makers to determine sufficient capacity to accommodate long-term care user choice in both institutional and community-based settings.

Home and community-based services have increased over the past decade due to the desire of long-term care users to stay in the community as well as the availability of new and expanded options for states.18,19 States, along with the federal government, have responded to these preferences by shifting individuals out of facility based care and into alternatives in the community. Following the Olmstead ruling in 1999, states have increased their focus on providing home and community-based services. States provide Medicaid home and community based services through their state plan benefits packages, waivers, and other federal demonstrations such as Money Follows the Person.20 In addition to a preference for services delivered outside of facilities, research has shown that long-term care services, delivered primarily through home and community-based waivers, can provide care at a lower cost.21,22,23  States and the Federal government, specifically Medicaid, will continue to be the primary payers of long-term care, in the absence of private insurance options, and will need to evaluate their options in financing these much-needed services.

Facility characteristics, such as ownership, remain important to policy makers and consumers because of their relationship with quality of care. For-profit and chain-owned facilities continue to be the majority of facilities, and concerns about quality of care provided in proprietary facilities persist. A recent U.S. Government Accountability Office report found that nursing facilities that were for-profit or owned by private investment firms were more likely to have deficiencies than non-profit facilities.24 Other studies have found that for-profit facilities may have lower staffing rates as compared to non-profit facilities, which can lead to higher levels of deficiencies.25 States vary in the distribution of facilities by ownership, so continued monitoring of facility ownership is needed by states to ensure a high quality of care is provided at these facilities.

Conclusion

Nursing facilities are one part of the long-term care delivery system that provides services to individuals who need assistance performing activities of daily living. With Medicaid as the primary payer for these services, states and the Federal government have an interest in the capacity and financing of the care provided in these facilities. Preferences for home and community-based services as well as concerns about ownership and quality remain important issues for policy makers and consumers over the next few years. Data from OSCAR and other sources will continue to provide necessary information to inform decision making.

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Appendix 1: Data Note

Data source:

The data pulled from the OSCAR system incudes data for all certified nursing homes in the United States and excludes intermediate care facilities and facilities in the territories and Puerto Rico. The data are compiled from the provider information file.  Data analyzed for this report use the most recent surveys for all facilities as of June 2012, as well as historical data analyzed for previous reports.

Methods:

Duplicate Records

We cleaned the data to eliminate duplicate provider numbers, which may result from changes in certification of the facilities or from follow-up surveys being conducted within the year. Specifically, we identified facilities with identical values for facility address, name, state, and city. When a potential duplicate was identified, the most recent record within a calendar year was selected; if multiple records were available for the same time within a calendar year, then records coded as skilled nursing facilities and nursing facilities were selected over facilities reported as hospital-based. For remaining facilities with the same data that appear to be two facilities at the same location, neither was eliminated.  Duplication cleaning resulted in the elimination of about 80-100 facilities a year.

Total Number of Beds

During earlier work using OSCAR, the total number of beds in each state reported in OSCAR was compared to the total licensed bed supply for each state from an independent survey of states. The total number of beds reported by facilities was significantly higher than the total licensed beds in the U.S. An analysis of this discrepancy found that some hospital-based facilities had reported the total number of acute care beds rather than the total number of skilled nursing beds for their facility. To correct this error, the maximum number of beds for a hospital-based facility was set to equal the maximum number of certified skilled nursing beds in the facility. Thus, this process made the total certified nursing facility beds more comparable to the total state licensed nursing facility beds in each state.

Total Number of Residents

OSCAR data on residents have some errors. First, some facilities reported extremely low numbers of residents. In order to identify facilities with possible errors in reporting residents, occupancy rates were computed for all nursing facilities.

Second, some facilities reported more residents than beds, suggesting more than 100 percent occupancy. Hospital-based facilities may have had approval for swing beds, which would allow the hospital to use an acute care bed for a nursing home resident. Therefore, hospital-based facilities with more residents than beds were left in the data set, but the maximum occupancy rate for such facilities was reported to be 100 percent.

For full data methodologies please see:  C. Harrington, H. Carrillo, M. Dowdell, P. Tang, and B. Blank. “Nursing, Facilities, Staffing, Residents, and Facility Deficiencies, 2005 Through 2010,” Department of Social and Behavioral Sciences, University of California, San Francisco, accessed January 2012. Available at http://www.pascenter.org. Based on the Online Survey, Certification, and Reporting system (OSCAR), Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services.

Data note from Charlene Harrington et al., “Nursing, Facilities, Staffing, Residents, and Facility Deficiencies, 2005 Through 2010,” Department of Social and Behavioral Sciences, University of California, San Francisco.

Endnotes
  1. “National Health Expenditure Projections 2011 – 2021,” Centers for Medicare and Medicaid Services, accessed May 16, 2013, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2011PDF.pdf

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  2. “The Older Population in the United States: 2010 to 2050,” Census Bureau, May 2010, http://www.aoa.gov/Aging_Statistics/future_growth/DOCS/p25-1138.pdf

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  3. “State Options that Expand Access to Medicaid Home and Community-Based Services,”  The Henry J. Kaiser Family Foundation, October 1, 2011, http://www.kff.org/medicaid/report/state-options-that-expand-access-to-medicaid/.

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  4. Charlene Harrington, et al., “Nursing Facilities, Staffing, Residents, and Facility Deficiencies, 2005 Through 2010," Department of Social and Behavioral Sciences, University of California, San Francisco. 

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  5. Ibid.

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  6. Time period for facilities survey is January 2011 – February 2012.

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  7. Charlene Harrington et al., “Nursing Home Staffing and Its Relationship to Deficiencies,” Journal of Gerontology. 55B (2000): S278-S287.

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  8. David C. Grabowski et al., “The Relationship of Medicaid Payment Rates, Bed Constraint Policies, and Risk-Adjusted Pressure Ulcers,” Health Services Research. 39 (2004):793-812.

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  9. David. B Smith et al., “Separate and Unequal: Racial Segregation and Disparities in Quality Across U.S. Nursing Homes.” Health Affairs (Millwood). 26 (2007):1448-58.

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  10. David C. Grabowski et al.,"Medicaid Payment and Risk-Adjusted Nursing Home Quality Measures,"Health Affairs. 23 (2004): 243-252.

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  11. Medicare Payment Advisory Commission, “Skilled nursing facility services:  Assessing payment adequacy and updating payments,” chap. 7 in Report to the Congress:  Medicare Payment Policy (Washington, DC:  March 2012), 171-208, http://www.medpac.gov/documents/Mar12_EntireReport.pdf.

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  12. David Stevenson et al., “Nursing Home Ownership Trends and Their Impact on Quality of Care,” ASPE, Accessed May 21, 2013, http://aspe.hhs.gov/daltcp/reports/2009/txnhown.htm

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  13. Vikram R. Comondore et al., “Quality of Care in For-Profit and Not-For-Profit Nursing Homes: Systematic Review and Meta-analysis. British Medical Journal, (2009) 339:b2732.

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  14. Charlene Harrington, et al., “Nurse Staffing and Deficiencies in the Largest for-Profit Chains and Chains Owned by Private Equity Companies.” Health Services Research, 47 (2012): 106-128.

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  15. Ibid.

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  16. Peter Kemper et al., “Long-Term Care Over an Uncertain Future:  What Can Current Retirees Expect?,” Inquiry, 42 (2005): 335-350, http://www.alisprotect.com/UncertainFuture.pdf

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  17. “The Older Population in the United States: 2010 to 2050,” Census Bureau, May 2010, http://www.aoa.gov/Aging_Statistics/future_growth/DOCS/p25-1138.pdf

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  18. Charlene Harrington et al., Medicaid Home and Community-Based Service Programs: 2009 Data Update, The Henry J. Kaiser Family Foundation, October 2011, http://www.kff.org/medicaid/report/medicaid-home-and-community-based-service-programs/.   

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  19. Molly O’Malley Watts et al., “How is the Affordable Care Act Leading to Changes in Medicaid Long-Term Services and Supports (LTSS) Today?  State Adoption of Six LTSS Options,” The Henry J. Kaiser Family Foundation, April 1, 2013. http://www.kff.org/medicaid/issue-brief/how-is-the-affordable-care-act-leading-to-changes-in-medicaid-long-term-services-and-supports-ltss-today-state-adoption-of-six-ltss-options/

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  20. Terence Ng et al. “Medicare and Medicaid in Long-Term Care,” Health Affairs, 29 (2009): 22-28. http://content.healthaffairs.org/content/29/1/22.full#xref-ref-6-1

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  21. Ibid.

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  22. Steven Kaye et al., “Do noninstitutional long-term care services reduce Medicaid spending?” Health Affairs, 28 (2009), 262-272.

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  23. Martin Kitchener  et al., “Institutional and community-based long-term care: a comparative estimate of public costs.” Journal Health and Social Policy, 22 (2006), 31-50.

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  24. “Private Investment Homes Sometimes Differed from Others in Deficiencies, Staffing, and Financial Performance,” GAO, July 2011. http://www.gao.gov/assets/330/321067.pdf.

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  25. Charlene Harrington, et al., “Nurse Staffing and Deficiencies in the Largest for-Profit Chains and Chains Owned by Private Equity Companies.” Health Services Research, 47 (2012): 106-128.

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