Revised Trends In States' Nursing Home Capacity

At the Intersection of Health, Health Care and Policy Cite this article as: C Harrington, S Preston, L Grant and J H Swan Revised trends in states' nursing home capacity Health Affairs, 11, no.2 (1992):170-180 doi: 10.1377/hlthaff.11.2.170

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DataWatch

Revised Trends In States’ Nursing Home Capacity by Charlene Harrington, Steve Preston, Leslie Grant, and James H. Swan Nursing home care, a key component of long-term care services, accounted for 9 percent-approximately $53 billion-of total U.S. per1 sonal health care expenditures in 1990. This represents an increase of 11.4 percent over 1989 spending on nursing home care, and these expenditures are expected to grow at an even higher rate throughout the 2 1990s. These increases are particularly troublesome to the Medicaid program, which is paying for 45 percent of the nation’s total nursing 3 home bill. Demand for nursing home beds has grown with the aging of the population and hospitals’ early discharge policies. However, as previous studies have shown, the growth rate in nursing home beds has not kept pace. In this DataWatch, we examine the supply of nursing home beds by state for 1978– 1989 an d compare growth in bed supply with growth of the aged population. Our research has uncovered considerable variation in bed supply and occupancy rates among the states; determinants of these variations are beyond the scope of this paper. Background On The Nursing Home Market Increased demand. Increased demand for nursing home care is the result of several Medicare policy changes as well as the aging of the population. Medicare’s prospective payment system (PPS) for hospitals, adopted in 1983, has led to shortened hospital stays and increased numbers of referrals and admissions to nursing homes from hospitals. These in turn have led to increased severity-of-illness levels of nursing 4 home residents. In 1986, to encourage nursing home participation in Medicare, Congress passed legislation (P.L. 99-272) that allowed proCharlene Harrington is a professor and Steve Preston, a doctoral candidate, at the Institute for Health and Aging, University of California, San Francisco. Leslie Grunt is an assistant professor at the School of Public Health, University of Minnesota, in Minneapolis. James Swan is an associate professor in the Department of Health Administration and Gerontology, Wichita State University, in Wichita, Kansas. Downloaded from content.healthaffairs.org by Health Affairs on July 10, 2011 by guest

D ATAWATCH 171 5

spective payment for Medicare nursing home payments. In April 1988, the Health Care Financing Administration (HCFA) issued new guidelines to the fiscal intermediaries that administer Medicare payments to nursing homes, increasing Medicare payment for nursing home services from $60 million per month at the beginning of 1988 to $100 million at 6 the end of 1988. While these policy changes have encouraged the demand for and use of nursing home--and other long-term care services, Medicare’s increasingly high copayments for nursing home care may offset some of the demand. Higher copayments may also shift some nursing home residents onto Medicaid coverage more quickly. Medicaid nursing home costs have been rising as well. In response, some states made their Medicaid nursing home eligibility and screening policies more stringent to reduce demand. At least thirty states instituted formal preadmission screening programs for Medicaid nursing home placement in the 1980s to ensure that services were needed; this became mandatory with the adoption of the 1987 Omnibus Budget Reconciliation Act (OBRA) nursing home reform legislation.7 These policies had some effect in curbing growth in the number of Medicaid nursing home recipients in the 1980s but did not reduce Medicaid’s share of the cost. Medicaid paid for 45 percent of nursing home expenditures in 1990, but a large part of this growth was for intermediate care 8 facilities for the mentally retarded (ICF-MR). These policies also led to increased severity of illness among Medicaid nursing home residents. Constrained supply. The number of nursing home beds is not keeping 9 pace with this increased demand. Bed supply grew rapidly after the development of Medicare and Medicaid in 1965 until the 1980s) when 10 it slowed below the rate of growth of the aged population. As the supply of beds has been constrained, the average occupancy rate has 11 remained high (about 92 percent nationally in 1986). The slowing of growth is the result of complex market -factors, including certificate-ofneed policies, state Medicaid nursing home reimbursement policies, and the high costs of capital construction. While most states adopted certificate-of-need policies for nursing homes to control or reduce. nursing home bed stock, James Swan and Charlene Harrington. found that states that approved higher certificateof-need dollar amounts had higher levels of changes in bed stock two 12 years later, in the 1981–1984 period. After the repeal of federal certificate-of-need requirements in 1986, there was greater variation in state certificate-of-need activities. Some states retained their programs and added moratoriums, while others removed all certificate-of-need requirements. These policy changes should be examined to see if they account for variations in state supply in the most recent period, particuDownloaded from content.healthaffairs.org by Health Affairs on July 10, 2011 by guest

172 HEALTH AFFAIRS | Summer 1992 larly where there was a higher growth rate of beds in the states in 1987. Nursing home reimbursement rates also affect supply. Because Medicaid pays almost half of the costs of nursing home care, state Medicaid programs have undertaken efforts to control reimbursement rates and 13 reduce spending in this area. As a result, nursing home supply has 14 decreased, and Medicaid nursing home expenditures have gone down. The combined effects of increased demand and limited supply raise the potential for problems with access to care for aging Americans in need of nursing home care and may pose problems with the quality of care as well. Future studies should examine the effects of these many policies and economic changes on the nursing home market. Methodology We collected the primary data on nursing home facilities and beds directly from state officials in three separate state surveys in 1983, 1986, and 1989, to cover licensed nursing home facilities and beds by state for each year from 1978 to 1989. No other source of data on licensed nursing homes by state is available for this time period. Moreover, this is one of the only reports on nursing home occupancy by state over time. Unfortunately, many states were not able to provide data on ownership of facilities or beds, so such data are not included. The surveys were designed to include all state-licensed skilled nursing and intermediate care facilities and beds in both free-standing and hospital facilities and to eliminate any duplicate counting of beds. Because the OBRA 1987 legislation implemented in 1990 eliminated the distinction between skilled nursing and intermediate care beds, we report combined bed totals. Licensed ICF-MR and residential care beds were not included. Data were collected by telephone, using a structured questionnaire that requested specific data on the number, types, level, and certification status of facilities and beds and occupancy rates. Data were collected from the principal state agency responsible for data reporting on nursing home beds and facilities– generally, state licensing and certification agencies and/ or health planning agencies. All states and the District of Columbia voluntarily provided data for each year of the study period. Where possible, state officials were asked to send published or unpublished reports and/ or data on beds and facilities for each calendar year, for data verification. Where such reports were not available, December statistics were used for the year. We specifically asked for the average occupancy rate for 31 December of each year; most states were able to supply the data in this form. Some differences due to reporting variations, such as reporting time frame, could not be avoided. Although Downloaded from content.healthaffairs.org by Health Affairs on July 10, 2011 by guest

D ATAWATCH 173 there are some seasonal variations in occupancy data, these are less important for nursing homes than for hospitals. Since not all statereported data could be verified by states’ documentation, the study relied upon official data and reports from the states themselves. This DataWatch updates an earlier 1988 published paper on state data presented for the 1978– 1986 period and corrects for data changed by 15 states. Where new data appeared to be inconsistent with data from previous or later years, we called state officials to clarify the reports or to obtain more accurate data. Some states changed their earlier data reports for the 1985 and 1986 period as they completed their own data cleaning and verification process. Thirty-three states slightly modified the total number of nursing home beds they reported for 1986, and twenty-nine states did so for 1985, but the overall change in total reported beds was less than 1 percent for each year. Findings Total facilities. Data on skilled nursing and intermediate care facilities by state (without duplication for those with dual licensure and excluding ICF–MR beds) show a steady growth in the number of facilities in the nation-an increase of 13 percent in the eleven-year period for the United States overall. Most states had an increase in the total number of facilities, although nine states showed a drop, and four remained stable. Total beds and average size of facility. The number of beds increased by 24 percent over the eleven-year period (Exhibit 1). Growth in number of beds exceeded growth in the total number of facilities by eleven percentage points. Six large states possess 38 percent of all nursing home beds in the United States (California, Illinois, New York, Ohio, Pennsylvania, and Texas). The average number of beds per facility increased from 90.3 beds in 1978 to 99.4 beds in 1989 (a 10 percent increase in size during the eleven-year period). The District of Columbia, New Jersey, Illinois, and Pennsylvania had the largest average facility size. Hospital-based nursing home beds. Nursing home (skilled and intermediate care) beds can be classified by type of facility: free-standing or hospital-based in either chronic disease or general hospitals. During 1978–1989, the number of hospital-based nursing home beds remained stable and constituted only 4.6 percent of the total beds in 1989. There was wide variation across states. In 1989, Hawaii had 40 percent hospital-based beds; Maryland, 21 percent; Alaska, 17 percent; South Dakota and Tennessee, 13 percent; and Vermont, New Hampshire, and Idaho, 10 percent. All other states had lower rates; four jurisdictions Downloaded from content.healthaffairs.org by Health Affairs on July 10, 2011 by guest

174 HEALTH AFFAIRS | Summer 1992 Exhibit 1 Number Of Licensed Skilled Nursing Facility And ICF Beds, BY State, 1978-1989 State Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire

1978 19,879 623 5,354 18,548 110,826 20,066 24,169 2,762 1,881 34,939 30,588 2,381 4.454 87,262 41,578 30,369 25,910 16.167 22,541 8,693 19,322 43,295 46,026 40.06 1 11,424 35,779 6,270 18,284 2,009 5,952

New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah

29,545 2,910 90,178 17,424 5,956 65,126 26,270 14,653 66,673 8,228 9,875 7,386 18,505 97,709 5,758

1981 21,135 539 6,904 19,838 111,305 18,347 26,248 3,395 1,793 37,803 31,348 2,626 4,805 90,277 44,853 31,161 26,202 18,850 25,293 8,898 21,603 43,647 46,348 42,546 13,455 41,523 6,104 18,674 2,243 6.684 33,948 3,984 93,504 21,166 6,514 72,650 27,491 15,142 73,448 8,724 11,795 7,745 25,218 100,448 5,423

1984 22,244 555 9,464 20,780 113,860 17,986 26,711 3,802 2,649 44,097 34,462 2,648 4,773 90,810 51,523 32,838 26,621 20,371 28,432 9,100 23,284 44,236 48,555 44,461 14,476 46,698 6,362 18,213 2,509 6,605 36,760 4,505 96,127 22,833 6,767 78,762 28,817 15,275 82,499 9,344 12,008 7,829 27,330 101,220 5,716

1987 22,695 650 14,546 22,026 117,318 18,704 27,695 3,948 2,993 58,620 34,940 2,950 4,923 95,291 54,595 33,810 27,789 21,318 35,873 9,477

Vermont Virginia Washington West Virginia Wisconsin Wyoming

2.852 16,283 28.225 5,451 50,542 1,962

3,069 20,313 27,307 6,540 52,700 2,060

3,267 22,398 25,911 7,807 53,834 2,370

3,442 23,541 28,439 9,581 51,243 2,411

13,768 8,104 33,017 13,959 7.273 3,577 24,783 28,471 9,646 49,373 2,721

United States

1,308,923

1,393,636

1,470,504

1,574,097

1,601,195

24,941 46,778 50,512 44,999 14,763 50,230 6,662 18,342 2.743 6,538 43,054 6,148 101,077 23,915 6 .8 2 1 85,501 31,136 15,615 85,702 9,800 12,917 8,001 32,092 109,729 7,263

1988 22,767 693 14,924 22,426 119,564 18,713 27,795 4,175 2,945 61,055 35,465 3,187 5,082 95,521 55,362 34,306 28,641 21,821 36,855 9,599 25,545 48,755 50,954 44,984 14,949 51,878 6,817 18,510 2,913 6,641 43,898 6,311 101,408 24,829 6,874 86,701 31,515 15,763 86,561 9,801

Source: Institute for Health and Aging, University of California, San Francisco. Downloaded from content.healthaffairs.org by Health Affairs on July 10, 2011 by guest

1989 22,733 740 15,190 22,533 121,826 18,879 28,502 4,483 2,999 61,127 35,761 3,191 5,279 97,058 57,307 34,856 29,242 21,286 36,970 9,664 26,368 49.182 51,813 44,957 14,908 52,337 6,911 18,858 3,175 6,808 44,905 6,311 102,595 25,218 6,948 88,530 32,975 15,381 87,980 9,904 14,133 8,146 34,690 114,923 7,801 3,653 25,711 28,636 9,855 50,072 2.721 1,626,031

D ATAWATCH 175 reported no hospital-based beds. Although some nursing home officials perceived an increase in hospital-based beds, this did not prove to be the case throughout the study period. Growth rates. The average annual percentage change in the number of U.S. nursing home beds was 1.99 in 1978– 1979 and 1.55 in 1988– 1989. In each of the years we examined, overall bed capacity increased, although the rate of increase fluctuated. The annual change was highest in 1987 (3.01 percent) and lowest in 1984 (1.45 percent). Some states, such as Arizona, New Mexico, and the District of Columbia, had high growth rates for certain years, but most states had only small annual increases in beds. Five states showed decreases in growth between 1988 16 and 1989, and of these, Kentucky and Oregon had the largest declines. The growth rates in relation to the aging of the population were interesting (Exhibit 2). In 1978, the total was 53.42 beds per thousand Exhibit 2 Number Of Licensed Skilled Nursing And ICF Beds Per 1,000 Population Age 65 And Older And Age 85 And Older, By State, 1978-1989 Age 65 and older

Age 85 and older

State AL AK AZ

1978 47.33 62.30 19.19

1981 1984 1987 1988 46.86 46.63 44.94 44.29 41.46 34.69 34.21 34.65 21.18 25.24 33.83 33.39

1989 43.47 33.64 32.74

1978 4.63 0.24 1.55

1981 5.20 0.24 1 .9 1

1984 5.93 0.21 2.70

1987 6.39 0.27 4.06

1988 6.52 0.31 4.11

1989 6.69 0.34 4.24

CA CO

61.83 84.67

62.38 69.81

62.22 64.47

63.48 61.32

63.89 64.04

63.29 58.27

9.40 6.25

10.50 10.44

11.37 11.22

12.90 1 1 .9 9

13.43 11.99

13.83 12.55

DE DC FL

49.32 25.77 22.30

55.66 24.23 21.48

55.91 35.32 22.74

52.64 38.87 27.39

54.22 38.75 27.68

56.75 39.46 26.85

3.95 3.08 4.59

5.41 3.61 4.67

6.45 6.11 5.54

6.51 7.37 7.27

6.95 7.19 7.66

7.35 7.40 7.71

GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH

62.68 34.01 50.61 71.18 73.33 79.92 86.66 40.83 58.10 63.92 51.25 61.24 52.54 85.97 40.95 56.52 77.41 90.51 34.64 60.73

58.70 32.42 49.03 70.04 74.63 79.09 84.25 45.10 61.39 61.79 52.82 59.06 49.36 86.65 45.77 63.20 70.16 89.35 31.15 63.06

59.62 28.17 44.61 67.27 81.14 80.29 82.42 46.62 65.51 60.26 52.21 57.23 43.46 86.33 47.31 68.67 66.97 84.71 28.84 57.94

56.08 27.06 42.81 67.77 81.49 80.50 82.95 46.65 76.00 59.60 51.32 58.47 47.65 84.27 46.42 71.35 65.96 83.37 25.64 54.03

55.65 27.96 43.O 7 67.27 81.30 80.91 84.49 47.03 76.94 59.62 51.40 60.49 41.22 83.15 46.43 73.07 65.55 83.38 25.55 53.99

54.76 26.82 43.63 67.54 82.57 81.44 85.25 45.10 75.91 58.93 51.80 60.49 47.10 81.89 45.73 72.79 65.20 84.19 26.24 54.03

4.19 1 .4 1 4.33 7.56 7.27 15.36 15.13 4.29 4.51 9.76 3.38 9.59 4.23 12.51 4.62 8.98 8.92 16.82 1.35 7.07

4.33 1.66 4.63 8.52 8.46 17.31 16.25 5.24 5.11 10.69 4.27 10.71 4.82 14.36 5.70 11.22 8.96 18.69 1.34 7.99

4.91 1 .8 1 4.61 9.19 10.62 19.89 17.10 6.09 6.06 11.56 5.01 11.60 5.64 16.08 6.46 13.36 9.04 19.07 1.52 8.12

4.89 2.23 5.19 10.23 12.07 22.41 18.52 6.87 8.58 12.05 5.40 12.51 6.03 16.48 7.05 14.86 10.17 20.42 1.69 7.48

4.92 2.50 5.43 10.42 12.46 23.27 19.19 7.20 9.06 12.09 5.46 13.09 6.19 16.43 7.26 15.52 10.81 20.74 1 .8 1 7.36

4.99 2.58 5.76 10.74 13.09 23.98 19.83 7.14 9.40 12.14 5.64 13.30 6.41 16.45 7.41 15.95 11.17 20.63 1.97 7.40

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176 HEALTH AFFAIRS | Summer 1992 Exhibit 2 Number Of Licensed Skilled Nursing And ICF Beds Per 1,000 Population Age 65 And Older And Age 85 And Older, By State, 1978-1989 (cont.) Age 65 and older State NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY a US

1978 35.64 27.20 42.52 30.78 76.36

1981 38.53 32.66 42.91 33.70 79.44

57.58 71.97 50.88 45.20 66.89 36.71 82.99 37.54 74.93 55.90 50.93 33.99 69.18 23.7O 92.74 54.50 53.42

60.59 71.78 48.07 46.81 67.11 39.45 83.28 47.49 71.29 47.57 52.02 38.91 60.82 26.91 91.02 5 4 .2 1 53.12

1984 39.19 33.37 42.95 33.19 78.69

1987 1988 43.27 43.59 40.99 40.72 43.74 43.65 31.68 32.00 76.64 76.38 61.82 63.38 63.19 72.04 74.67 74.68 44.40 41.86 41.26 49.46 48.53 48.33 68.20 68.06 67.13 36.28 35.10 36.42 81.55 80.82 80.24 48.37 53.31 53.05 67.17 67.36 68.28 45.01 52.63 51.22 52.69 52.95 54.20 39.23 37.73 38.72 52.77 52.96 51.67 30.74 36.15 35.99 88.54 80.82 76.90 57.80 54.80 60.47 52.57 52.75 52.72

Age 85 and older 1989 43.98 39.20 43.83 31.60 75.52 63.28 77.04 39.24 48.37 66.92 36.24 79.09 55.50 67.05 53.43 53.72 39.13 50.50 36.23 76.80 59.15 52.48

1978 3.57 1.66 5.67 2.24 11.42 5.53 10.12 6.41 6.00 10.56 2.07 15.65 3.67 5.69 2.69 6.87 2.31 7.51 2.91 12.28 3.65 6.00

1981 4.93 2.26 6.73 2.94 13.13 7.22 10.18 6.46 7.36 12.43 2.59 18.06 5.22 5.49 2.27 7.35 3.12 6.75 3.54 14.11 3.18 5.71

1984 1987 5.71 6.80 2.55 3.63 7.32 8.05 3.41 3.74 13.74 15.70 8.54 9.72 10.26 12.45 7.24 7.76 8.99 9.90 14.40 15.07 2.83 3.17 19.00 20.42 6.15 7.63 5.28 5.90 2.32 3.13 7.97 8.41 3.64 3.86 6.64 7.22 4.73 6.63 15.71 15.77 3.77 4.42 5.37 5.44

1988 6.97 3.74 8.21 3.93 16.46 10.00 13.01 7.89 10.25 15.17 3.45 20.96 7.95 6.21 3.14 8.81 4.06 7.21 6.96 15.39 5.08 5.31

1989 7.21 3.77 8.40 4.06 17.64 10.37 14.17 7.69 10.62 15.48 3.60 21.37 8.47 6.36 3.43 8.80 4.20 7.24 7.40 15.79 5.24 5.24

Sources: Institute for Health and Aging, University of California, San Francisco; and U.S. Department of Commerce, Bureau of the Census, Current Population Reports, various years. a Average for all beds.

persons age sixty-five and older. This ratio reached a low of 52.38 beds per thousand in 1986. Although it increased slightly in 1987, the overall ratio in 1989 continued at 2 percent below the 1978 level. The annual percentage change in nursing home beds per thousand persons age sixty-five and older declined for the nation as a whole for almost every year of the study period. In 1978, thirty states showed declines in beds per thousand, and in 1989, twenty-nine states had declines. Many states with declines were from the West, the Southwest, or the South. For the oldest old, licensed nursing home beds declined nearly 13 percent over the period, from 6.00 beds per thousand persons age eightyfive and older in 1978 to 5.24 in 1989 (Exhibit 2). Although the oldest old are at the greatest risk for needing nursing home care, the ratio of available beds is declining more for this group than for those age sixtyfive and older. While the states show wide variation in ratios of beds per thousand persons age eighty-five and older, the distribution is similar to that for those age sixty-five and older. The number of nursing home beds per thousand persons age sixty-five and older was substantially higher in the north central states throughout the period (mean of seventy-five Downloaded from content.healthaffairs.org by Health Affairs on July 10, 2011 by guest

D ATAWATCH 177 beds per thousand in 1987). The average number of beds per thousand elders was somewhat higher in the northeastern states (mean of fifty-five beds in 1987) and lower in the western (mean of forty-four beds) and southern states (mean of forty-nine beds) (p