2004 long-term care act raised costs and worsened care, study shows

8, 2008
Kristen Bole

The California Long-Term Care Reimbursement Act of 2004 increased nursing home costs, but failed to improve quality or access to care, according to a UCSF evaluation on the legislation’s impact.

Between 2004 and 2006, MediCal costs in California’s free-standing nursing homes increased by $590 million, or nearly 9 percent, to a total of $6.6 billion in 2006, according to the study, which was released today by researchers in the UCSF School of Nursing. Yet during the same time period, nursing home staffing levels remained significantly lower than the recommended numbers and staff turnover actually increased.

The study used publically available federal and state data to provide an initial evaluation of the impact of the new rate system. Among the elements analyzed were MediCal admissions and length of care; staffing levels, staff turnover, complaints and citations; and nursing home profits and income margins.

“The quality of nursing home care has been a serious problem in California and nationwide for many years,” said Charlene Harrington, PhD, RN, UCSF professor of sociology and nursing and lead author of the study. “This legislation was designed to address that, but so far it has not met the challenge.”

Harrington said the bill was designed to improve both the quality and access to nursing home care by increasing MediCal reimbursement rates, using a payment system based on actual costs of care for each facility, with certain cost ceilings. It also aimed to increase nurse staffing levels, foster improved compliance with state and federal regulations, and improve efficiency in nursing home administration.

Implemented in 2004-05, the system effectively raised MediCal rates from $124 per day in 2004 to $152 per day in 2006, this analysis found.

However, that rise did not result in improved access to nursing homes; the total number of patient days billed to MediCal actually decreased 2 percent between 2004 and 2005, while the overall proportion of MediCal days remained steady at 69 percent of the total patient-days of care statewide.

The evaluation did show a slight increase in overall nursing home staffing levels statewide by 2006, Harrington said, but staffing by registered nurses remained significantly lower that those recommended by experts. In fact, 16 percent of the facilities, or 144 total, still failed to comply with the minimum state staffing standard, which is 3.2 RN hours per resident-day.

Harrington’s previous research has established a direct correlation between the number of registered nurses on staff in nursing homes and the quality of patient care.

Under the current legislation, nursing staff turnover grew worse in nursing facilities and was unacceptably high in all types of facilities analyzed, with three out of four staff members leaving employment each year. Wages and benefits for nursing assistants, who provide the majority of nursing home care, also did not keep pace with inflation between 2004 and 2006, but administrative salaries were increased substantially.

The assessment concluded that the quality of care after the implementation of the new reimbursement rate system actually appeared to decline. During that time, the number of complaints about poor quality of care increased, as did documented deficiencies and citations, including those that caused harm and jeopardy.

Nursing assistant wages failed to keep pace with inflation between 2004 and 2006 and licensed nursing inflation-adjusted wage increases were minimal, while staff benefits declined. Overall, the new reimbursement rate increased the net income margins in all types of nursing facilities by over 700 percent.

With increased revenues, spending on direct care was expected to increase, according to the study’s authors, and did rise 13 percent in the two years analyzed, due to a modest (3 percent) increase in total staffing. Administrative expenditures, however, rose 19 percent in the same time period, reflecting the new quality assurance fee costs, licensing fees, training costs, and liability costs. As a result, the level of direct care spending dropped in proportion to the total costs, to 53 percent after the new reimbursement system was implemented.

“Clearly, California needs to seriously address the policy changes in reimbursement rates that are needed to achieve these goals in quality of care,” Harrington said.

The study’s authors made four recommendations to achieve those goals:

Attach more specific minimum requirements for staffing levels. Establish greater penalties for poor quality of care, including “zero tolerance” for not meeting minimum staffing levels. Stronger enforcement of the staffing standards and quality standards. Substantially increase wages and benefits for nursing staff to reduce turnover and stabilize the workforce.

This work was supported by funds from the California HealthCare Foundation.

The other investigators on study were Janis O’Meara, MPA; Eric Collier, PhD, RN; Taewoon Kang, PhD; Caroline Stephens, MS, RN; and Jamie Chang, MA, all from the Department of Social and Behavioral Sciences in the UCSF School of Nursing. UCSF is a leading university dedicated to promoting health worldwide through advanced biomedical research, graduate-level education in the life sciences and health professions, and excellence in patient care. For more information on UCSF, visit

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