Do Owner-Managers at Nursing Facilities Provide Higher Quality? An Application of Instrumental Variables John R. Bowblis Farmer School of Business and Scripps Gerontology Center
Acknowledgements Co-author: Sean Shenghsiu Huang from Georgetown University » We thank the Ohio Department of Job and Family Services and the » Scripps Gerontology Center for providing access to some of the data used in this paper.
Background In a mixed mode economy, there is competition among for-profit, » not-for-profit, and government healthcare providers Extensive literature compares each ownership type » » Methods generally use a broad-brushed approach which ignores the heterogeneity within each ownership type This paper focuses on a type of heterogeneity among for-profits » » Specifically, the role of owner-managers
Research Question Among for-profits any residual profit is shared among owners: » » An owner-manager is an administrator with a significant equity interest in the facility – claim to residual profit Is the quality of care provided at for-profits that are operated by » owner-managers different from for-profits that are not operated by owner-managers ? » Examine the nursing home (NH) industry
Conceptual Model: Owner-managers Mechanisms Increasing Quality Mechanisms Lowering Quality Directly observe problems; Greater flexibility and control 1. 1. faster response can lead the owner to override other staff members’ decisions Greater flexibility and control, 2. leading to faster adoption of Increases focus on the bottom 2. efforts to improve quality line (e.g. profits) Personal reputation impacted 3. Hypothesis: Unclear whether owner-managers provide better quality (among for-profit NHs).
Dataset Utilize Ohio data from 2005 through 2010: » » Ohio Medicaid Cost Reports » OSCAR data » Minimum Data Set (v2.0) » Area Health Resource File Unit of observation is long-stay resident-assessment (N=787,714) » » Key variable of interest : Indicator whether facility is operated by owner-manager - key administrator or relative has at least 5% equity ownership in the facility.
Empirical Strategy (1) Dependent variables: » » 11 long- stay quality measures utilized by CMS’ NH Compare Website (e.g. catheter use, pain, pressure ulcers, falls, etc.) » 4 long- stay quality measures not utilized by CMS’ NH Compare (e.g., contractures, rash, antipsychotic and hypnotic medication) Resident, facility, and county level controls: » » Resident : Age, gender, cognitive and physical status; Facility : number of beds, chain, occupancy rate, payer-mix, staffing, rural/urban; County : demographics, competition
Empirical Strategy (2) Potential endogeneity between quality and owner-managers, as » unobserved factors may influence the NH selection Utilize an instrumental variables approach called 2SRI » » Requires variable that explains decision to choose an owner- manager NH but not quality » Follow literature and use differential distance between closest for-profit NH with and without an owner-manager F-statistic = 5763.72; Balanced observable characteristics » McCellan et al., 1994; Gowrisankaran and Town, 1999; Bowblis and McHone, 2013; Grabowski et al 2013; » Bowblis, Brunt, Grabowski 2016; Rahman, Norton, Grabowski (2016)
Marginal Effect of Residing in a For-profit with a Owner-Manager Long-Stay Quality Measure Logit 2SRI Logit Publically Reported Quality Measures Key findings Decline in Physical Functioning -0.006*** -0.008 Catheter Use 0.005** -0.012 1. Endogeneity matters (2SRI) Moderate-Severe Pain -0.005*** -0.012 2. Owner-managers have Mostly Bed or Chairfast 0.005*** -0.014** Bowel/Bladder Incontinence 0.021*** 0.046*** better quality in 12 of 15 Physically Restrained -0.008*** -0.021*** quality measures Urinary Tract Infection -0.002 -0.018*** 3. Among 7 statistically Weight Loss -0.007*** -0.013*** Pressure Ulcers (Low Risk Resident) 0.001 -0.004 significant measures, 5 Pressure Ulcers (High Risk Resident) -0.000 0.003 indicate better quality, two Falls with Major Injury -0.005*** -0.034*** indicate worse quality Non-Publically Reported Quality Measures 4. Generally, owner-managers Contractures 0.080*** 0.185*** have better quality Rash -0.008*** -0.009 Antipsychotic Medication -0.000 -0.017 Hypnotic Medication -0.002 -0.001 *** p<0.01, ** p<0.05, * p<0.1
Heterogeneous Effects (1) Most owner-managers are in free-standing facilities » » Examine FPs that are non-chains only
Marginal Effect of Residing in a For-profit with a Owner-Manager Regressions using 2SRI Baseline Non-Chains Long-Stay Quality Measure (2SRI Logit) Only Publically Reported Quality Measures Key findings Decline in Physical Functioning -0.008 -0.005 1. Effect for bowel/bladder Catheter Use -0.012 -0.006 Moderate-Severe Pain -0.012 0.000 incontinence is now not Mostly Bed or Chairfast -0.014** -0.003 statistically significant Bowel/Bladder Incontinence 0.046*** 0.020 Physically Restrained -0.021*** -0.012* 2. Other effects are a little Urinary Tract Infection -0.018*** -0.014*** Weight Loss -0.013*** -0.009** weaker, but owner- Pressure Ulcers (Low Risk Resident) -0.004 -0.000 managers still generally Pressure Ulcers (High Risk Resident) 0.003 -0.010 provide better quality of Falls with Major Injury -0.034*** -0.022*** care Non-Publically Reported Quality Measures Contractures 0.185*** 0.119*** Rash -0.009 -0.006 Antipsychotic Medication -0.017 -0.009 Hypnotic Medication -0.001 -0.000 *** p<0.01, ** p<0.05, * p<0.1
Heterogeneous Effects (2) Reputation is more important or profits may be larger if there are » fewer competitors » Hypothesis : If owner-managers care about long-run profits, effects could be larger in less competitive markets. Examine if effects vary by different in by level of competition » » Less competitive: Counties with <= 10 NHs (66 of 88 counties) » More competitive: Counties with 60+ NHs (Cuyahoga & Hamilton counties)
Marginal Effect of Residing in a For-profit with a Owner-Manager Regressions using 2SRI Less More Baseline Competitive Competitive Long-Stay Quality Measure (2SRI Logit) Markets Markets Key findings Publically Reported Quality Measures Decline in Physical Functioning -0.008 0.015** -0.022 1. Owner-managers have Catheter Use -0.012 -0.018* 0.004 better quality in less and Moderate-Severe Pain -0.012 -0.044*** 0.028 Mostly Bed or Chairfast -0.014** -0.018** -0.017 more competitive markets Bowel/Bladder Incontinence 0.046*** 0.070*** -0.015 Physically Restrained -0.021*** -0.021** 0.003 2. Statistically significant Urinary Tract Infection -0.018*** -0.033*** -0.069*** results are more Weight Loss -0.013*** -0.022*** -0.022 Pressure Ulcers (Low Risk Resident) -0.004 -0.002 -0.024 concentrated in less Pressure Ulcers (High Risk Resident) 0.003 0.002 -0.091*** Falls with Major Injury -0.034*** -0.043*** -0.042** competitive markets Non-Publically Reported Quality Measures Contractures 0.185*** 0.204*** -0.010 Rash -0.009 -0.018 0.064** Antipsychotic Medication -0.017 -0.003 -0.156*** Hypnotic Medication -0.001 -0.011 -0.007 *** p<0.01, ** p<0.05, * p<0.1
Robustness Checks Four separate robustness check performed: » » Restricted to NHs with same ownership structure 3+ years » Exclude nurse staffing as controls » Resident used a NH in a zip code different from home zip code » Examine only NHs in urban areas Results are consistent with Baseline 2SRI Logit models »
Conclusions Effect of owner-managers is theoretically ambiguous » Findings: » » Owner-managers have higher quality of care compared to for- profits without an owner-managers » Effect more concentrated in less competitive markets
Limitations Examine only state of Ohio » » Owner-manager is defined as having at least 5% equity position (cannot identify exact ownership interest) Limited number of non-publically reported quality measures » » Do not have measures of quality of life Qualitative research is needed to identify specific mechanisms that » drive the results
Implications Suggests that owner-managers may use the greater control power » to increase quality: » Develop longer-term reputation – drives long-run quality and lower cost of customer acquisition » May be better able to address problems as they arise Suggests the broad label “for - profit” is more complex than previously » thought
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