A Multi-part Model Approach to Examining Medicaid Payment Methods and Nursing Home Quality

The incentive to provide nursing home quality depends, in part, on whether the state Medicaid reimbursement system is prospective or retrospective in nature. This paper examines the effect of state-level Medicaid reimbursement methods on the provision of quality in the context of bed constraint regulations that may influence market tightness. A three-part estimation strategy is constructed around the idea that a change in the Medicaid reimbursement method may affect both a facility's payer mix and the provision of quality. Across a range of quality measures, this multi-part model did not show nursing home quality to be significantly higher under a retrospective reimbursement system as compared with a prospective-based system of reimbursement. This finding holds regardless of whether the analysis was isolated to those markets with the tightest supply of beds or those homes that care for predominantly Medicaid residents. (March 2002)