Nursing Homes

A recent paper by Kitchener et al. (HSR 2008) investigates the actions of one nursing home chain to find how they maximized their profits. The authors find that Sun Healthcare Inc. employed three strategies to maximize shareholder value:

1. rapid growth through debt-financed mergers;
2. labor cost constraint through low nurse staffing levels; and
3. a model of corporate governance that views sanctions for fraud and poor quality as a cost of business.

Should the government impose a minimum nurse/patient ratio in order that quality care continues?

Most libertarians abhor almost any form of regulation, but the case of the nursing homes may be an exception. The “customers” of nursing home care are elderly patients who–by definition–are in some way not able to take care of themselves. Thus, if the patient is treated poorly, it may be nearly impossible for them to change facilities or often it is even difficult for the elderly individual to communicate to their relatives that their care level is poor. The Kitchener paper found that one nursing home chain is sacrificing quality by using low nursing staffing level; should the government mandate a minimum nursing staffing level for nursing homes?

I would argue that they should not. While nurses are of course one of the most–if not the most–important input which affects the quality of nursing home care, regulating inputs is not ideal. This regulation will likely stifle innovation. If new technologies are developed–such as a digital scale monitoring device mentioned in Akshay Kapur’s blog–it may be possible to substitute capital (technology) for labor (nurses) and achieve better medical care for lower costs.

Should nursing homes be exempt from regulation? On this point, I believe that there should be some regulation. The government must continue to monitor nursing home quality and register complaints. Nursing homes with low quality scores or who abuse patients should not receive Medicare or Medicaid patients.

It is important for the government to play a role in helping those who cannot help themselves; yet the government should not mandate how nursing homes should run their business, but instead insure that some minimum quality of care threshold is met.

• Martin Kitchener, Janis O’Meara, Ab Brody, Hyang Yuol Lee, Charlene Harrington (2008) “Shareholder Value and the Performance of a Large Nursing Home Chain” Health Services Research, Volume 43 Issue 3 Page 1062-1084.

There is an interesting article a few weeks back in the Wall Street Journal (”Opting Out“) which describes the plight of Amish and Old Order Mennonites who refuse to buy health insurance. Further, since these groups also refuse to participate in Medicaid government assistance will not bail them out either.

Nevertheless, these societies do have one form of insurance: mutual aid. When one member of the community becomes ill, the rest will pitch in to help finance the cost of the needed medical care. “Thousands of Amish families rely on the age-old system of churches paying bills members can’t afford, through voluntary donations.”

Because they are very closed societies, however, many Amish and Old Order Mennonite individuals marry distant cousins which can lead to a handful of genetic diseases. With such a high rate of expensive-to-treat diseases, this mutual aid system is faltering.

Further, since the Amish and Mennonite are uninsured, they actually pay more for medical care than would someone with private or public health insurance. This phenomenon was documented in my “Uncompensated Care” post.

What is the solution?

The Amish hope to persuade their local hospital to lower medical costs, but it is unlikely that a hospital will negotiate a lower rate for uninsured Amish compared to the uninsured non-Amish. The local Lancaster General hospital “…has increased its discount for uninsured patients to 25% from 15%…uninsured patients now receive the same discount that commercial insurers do, though not as much as the government does.”

The moral of the story is that it is very difficult to receive medical care in America today without health insurance.

• H.T.: Chronic Positivity
• H.T.: Lancaster Online “Faith not paying bills“

A Side note: If everyone receives at least a 25% discount, isn’t that just the regular price?