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State Regulation of Care Quality Is Costly to Nursing Homes

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, PhD, a researcher at the Agency for Healthcare Research and Quality, and Dana B. Mukamel, PhD, and Charlene Harrington, PhD, RN, of the University of California, and other co-investigators found the more stringent the regulatory requirements, the higher the costs nursing homes face.

They collected data on 11,168 freestanding 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% of the yearly expenditures for an average nursing home.

The researchers caution 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 Mukamel et al. (2011). Does state regulation of quality impose costs on nursing homes? Medical Care, 49(6), 529-534.

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