James C. Sherlock
I am being flooded with very good questions from readers and private correspondents on what sources of information go in to the ratings of nursing homes.
There are two primary sources,
- Center for Medicaid and Medicare Services (CMS) data, some of which comes from the states and most from its own massive databases; and
- State data, some of which comes from its own inspections, some from CMS, and some from audited annual financial reports of its nursing homes.
This column will attempt to provide a comprehensive view.
CMS Data
CMS data is accessible through the Medicare Nursing Home Compare website
Most of my commentary concerns staffing. The rating for staffing comes from a combination of the Payroll-Based Journal (PBJ) system that provides the data on actual levels of staffing each day of each quarter and the Minimum Data Set (MDS) national database that provides the data on needs for staffing for each patient and resident census. You will also see that the CMS gets its information on penalties assessed on private nursing homes from the state inspection data, not the other way around. If the state itself owns a nursing home or homes, those facilities are inspected and penalties assessed by the regional CMS office.
1. CMS’s health inspection database
This database stores the nursing home characteristics and health deficiencies issued during the three most recent state inspections and recent complaint investigations. Data about penalties assessed against nursing homes also come from this database.
For Virginia, the following measures on Nursing Home Compare come from state inspections except for the two Veterans Homes operated by the state with VA funding assistance. Those are inspected by Region 3 of CMS:
- Health inspections data.
- Fire Safety inspections data
- Penalties
2. Payroll-Based Journal (PBJ) system
The PBJ system allows nursing homes to electronically submit the number of hours facility staff are paid to work each day. The information is submitted quarterly, and is auditable to ensure accuracy. Staffing data are collected on the director of nursing, registered nurses (RNs) with administrative duties, RNs, licensed practical nurses (LPNs) with administrative duties, LPNs, certified nurse aides (CNAs), medication aides, and nurse aides in training. The following measures on Nursing Home Compare come from this data source:
- Total staffing (RN, LPN, CNA)
- RN staffing
- Physical Therapist hours
3. The Minimum Data Set (MDS) national database
Data for quality of resident care measures come from the MDS database. The MDS is an assessment done by the nursing home at regular intervals on every resident in a Medicare- or Medicaid-certified nursing home. Information is collected about the resident’s health, physical functioning, mental status, and general well-being. These data are used by the nursing home to assess each resident’s needs and develop a plan of care. The following measures on Nursing Home Compare come from this data source:
- Quality of resident care
- Staffing (resident characteristics used to estimate the amount of staffing needed)
- Resident census (used in calculating staffing hours per resident day)
4. Medicare claims data
CMS uses bills that nursing homes and hospitals submit to Medicare for payment purposes to identify when hospitalizations and nursing home admissions take place. These are used to calculate hospital readmission rates, emergency room visits, and discharges. These are the data used along with MDS staffing data to develop a rating for quality of resident care.
Virginia Data
In addition to having access to all of the Medicare Nursing Home Compare data, the Virginia Department of Health conducts inspections for both its own licensing purposes and under contract to CMS for annual inspections of Medicare- and Medicaid-certified nursing homes. It also collects efficiency and financial information on each nursing home in Virginia from audited annual financial reports. So, if you wish to know whether a nursing home is profitable, you can check vhi.org .
I present below efficiency and financial indicators from facility data collected by Virginia. I have used as an example Lexington Court Nursing and Rehabilitation, the predecessor owners of Canterbury Nursing and Rehabilitation in Richmond, for its fiscal year ending 10/31/2019.
A. Efficiency Indicators – Lexington Court
From the efficiency data, you can see
- gross and net patient revenue per adjusted patient per day
- costs per patient per day both total and the individual elements of labor, non-labor and capital costs
- productivity measured as paid hours per adjusted patient per day
- financial viability measured as total margin, return on assets, cash debt coverage and fixed asset financing ratio
- community support based on two measures, (a) charity care bad debt and taxes, and (b) Medicaid participation
In Virginia efficiency data, patient days are adjusted by case mix and by outpatient and ancillary service revenues. That yields figures that the state categorizes in quartiles relative to all of the facilities in the state. The first quartile is always the best in the state’s view; the fourth the worst. You will see that the state’s point of view on these figures may be different in some categories from the facility owner’s point of view.
In the categories of charges, costs and productivity/utilization, lower is better from the state’s point of view.
- Charges: Net patient revenue per adjusted patient day was 4th quartile at $201.17 in a state range of $133.18 to $382.07
- Costs per adjusted patient per day was third quartile at $194.40 in a state range of $138.99 to $444.20
- Productivity/Utilization. Paid hours per adjusted patient day was third quartile 4.56 in a state range of 1.85 to 14.93.
In the categories of Financial Viability and Community support, Virginia assesses that higher is better.
- Financial Viability. Lexington Court was ranked in the second quartile in total margin and first (best) quartile in return on assets and cash debt coverage. The only measure in which it fell short was fixed asset financing ratio in which it edged into the 4th quartile.
- Community Support. Lexington Court was rated in the third quartile in charity care, bad debt and taxes with 2.51%. Expressed as a percentage, this is the amount of charity care (converted to a cost basis), bad debt and taxes the facility incurred in relation to its total expenses.
- Medicaid Participation. Expressed as a percentage, it is the amount of patient days for patients enrolled in the Medicaid program in relation to total patient days. Lexington Court was in the middle of the fourth quartile in Medicaid participation with only 26.64% of its patients covered by Medicaid. The first quartile was composed of nursing homes with the highest percentages of Medicaid patients (up to 100%).
B. Financial Indicators – Lexington Court
- Net patient revenue plus other operating revenue: $15,132,121
- Total expense: $14,255,393. The company paid only $7,085 in taxes. Labor expense was $9,576,794.
- Operating income/profit: $876,728
- Balance Sheet net worth $1,847,386
Lexington Court was on a sound financial footing and was profitable:
$876,728 in profits provided ample room to hire a two additional newly graduated American RN’s or foreign-trained RNs at a total cost of about $200,000 and still have good profitability.
Conclusion
That may be more information than you want, but based on the questions in the commentary after my columns, apparently there are some who want it.
If you have a lot of time to fill and are interested, go to vhi.org and check the efficiency and financial data for Virginia Board of Health member Tommy East’s 17 Heritage Hall nursing homes in Virginia, 16 of which are rated as below average or much below average in staffing.
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