State regulation of care quality is costly to nursing homes

Research Activities, January 2012, No. 377

Nursing homes are a highly regulated industry in the United States. They must comply with Federal Medicare and Medicaid standards, as well as those imposed by individual States. Maintaining compliance with all of these regulations imposes costs on nursing homes, concludes a new study.

William D. Spector, Ph.D., a researcher at the Agency for Healthcare Research and Quality (AHRQ), and Dana B. Mukamel, Ph.D., and Charlene Harrington, R.N., Ph.D., of the University of California, and other coinvestigators found that the more stringent the regulatory requirements, the higher the costs nursing homes face. They collected data on 11,168 free-standing U.S. nursing homes between 2004 and 2006. Medicare cost reports yielded information on total expenditures and wages. The researchers also conducted a survey of each State's Certification and Licensing Office for information on nursing home quality deficiencies and the associated financial penalties. From these and other data, they calculated for each State a regulatory stringency index. Higher index values indicate stricter State regulation of quality.

The researchers found that nursing homes located in States with more stringent regulation of quality had higher costs. The incremental costs of one standard deviation increase in regulation stringency resulted in $78,467 in costs (in 2006 dollars). This translates into 1.1 percent of the yearly expenditures for an average nursing home. The researchers caution that the findings should not deter continuing attempts to regulate quality and note that research underway is aimed at estimating the impact of State regulation on quality. Estimates of both the costs and benefits of regulation are needed to assess the value of regulation.

More details are in "Does state regulation of quality impose costs on nursing homes?" by Dr. Mukamel, Yue Li, Ph.D., Dr. Harrington, Dr. Spector, and others in the June 2011 Medical Care 49(6), pp. 529-534. Reprints (AHRQ Publication No. 11-R062) are available from the AHRQ Publications Online Store .

Page last reviewed January 2012
Internet Citation: State regulation of care quality is costly to nursing homes: Research Activities, January 2012, No. 377. January 2012. Agency for Healthcare Research and Quality, Rockville, MD.