A New Study Hopes to Draw Connections Between Medicaid Payment-to-Cost Ratios and Nursing Home Quality Outcomes

Last fall, a report by University of Massachusetts (UMass) Boston researchers showed that Medicaid reimbursements fall short of covering the actual costs of nursing home care for Medicaid residents. That research will now go a step further and try to examine how closely Medicaid payment-to-cost ratios affect outcomes in nursing homes. The LeadingAge LTSS Center @ UMass Boston, a center within the Gerontology Institute at UMass Boston, received a two-year grant from The Donaghue Foundation to build on the initial research by answering this important question.

“Now that we know, on a facility-by-facility basis, what the Medicaid payments are, what the nursing home costs are, and the relationship between payments and costs, we can relate those to outcomes,” says Edward Alan Miller, Ph.D., principal investigator of the study and a professor and chair of the Department of Gerontology at UMass Boston.

The high-level result of the group’s previous research, Assessing Medicaid Payment Rates and Costs of Caring for the Medicaid Population Residing in Nursing Homes, showed that for each dollar a nursing home spends providing daily care to a Medicaid recipient, the average nursing home receives just 82 cents in reimbursement. The team will now apply that data to answer new questions regarding outcomes: Do Medicaid payment-to-cost ratios affect nursing homes’ five-star quality ratings? Do they affect resident quality outcomes, such as falls or hospitalizations? In addition, the research will explore how the relationships vary by racial-ethnic composition of residents in nursing homes. The findings will establish a direct relationship between payment levels and quality of care that will be crucial to inform policy.

“The nursing home industry is under tremendous financial pressure at a time when there are demands on the industry to make more investments in patient care. At the same time, the supplemental pandemic payments from the government are now gone,” says Marc A. Cohen, Ph.D., the co-director of the LTSS Center and part of the project team. “How can you meet the goals of increasing quality of care? If you’re going to invest dollars, it’s important to know which things really make a difference.”

The initial study was the first rigorous study to examine on a facility-by-facility basis across 44 states, how well Medicaid reimbursements in nursing homes covered costs. It drew from data collected in 2019, before Covid-era closures and funding altered the market. Miller hopes to continue this work with data gathered in future years.

“This research will show association, not causation,” Miller says. “To look at causation, you must look at these numbers over time. A future study after this might look at data for 2023 or 2024 to see the payment-to-cost ratio for those years and examine how they’ve changed over time.”

This research is timely. It will inform important policy discussions around staffing levels, quality of care, and budgets as increasing attention turns to nursing homes from policy makers and the provider and consumer advocacy communities. Which outcomes are most close related to the ratio of payment-to-costs? Which are less closely related?

“What this project represents is the creative merging of disparate pieces of a puzzle as it relates to financing of nursing homes and quality,” Cohen says. “It takes advantage of a government investment in these data sets and uses them to bring new knowledge into the discussion in a coherent way.”