Nursing home costs and risk-adjusted outcome measures of quality

BACKGROUND. The inadequacy of quality of care in nursing homes has been and continues to be a focus of public concerns. Understanding the relationship between quality and costs can offer guidance to policies designed to encou rage high quality. OBJECTIVES. TO investigate the relationship between costs and quality of ca re in nursing homes, and to test the hypothesis that higher quality may be associated with lower casts. RESEARCH DESIGN. Statistical regression techniques were used to estimate nu rsing home variable-cost functions that included three risk-adjusted outcom e measures of quality. Quality measures were based on decline in functional status, worsening pressure ulcers, and mortality. The study hypothesis was tested by an F test for the exclusion of nonlinear quality variables in th e cost functions. SUBJECTS. The study included 525 freestanding private and public nursing ho mes in New York State, or 84% of all nursing homes in the state during 1991 . RESULTS. F tests rejected the hypotheses that the three quality measures co uld be excluded from the cost function and that the association between cos ts and quality was linear. An inverted U-shaped relationship between qualit y and costs suggests that there are quality regimens in which higher qualit y is associated with lower costs. CONCLUSIONS. Policies that encourage research to identify care protocols an d management strategies leading to better outcomes and lower costs, as well as policies that encourage dissemination of such practices, may prevent de cline in quality despite the continued financial constraints faced by nursi ng homes.