hospice and nursing homes

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Hospice and Nursing HomesNicholas G. Castle PhD aa AtlantiCare Health Systems , 6727 Delilah Road,Egg Harbor Township, NJ, 08234, USAPublished online: 21 Oct 2008.

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Hospice and Nursing Homes

Nicholas G. Castle, PhD

ABSTRACT. In this article a descriptive analysis of nursing homeswith special care hospice units is provided. These are compared tonursing homes with other special care units and to nursing homeswithout any special care units. An analysis of the determinants of nurs-ing homes with special care hospice units is also provided. Factors suchas ownership, staffing levels, having other special care units, case-mixintensity, competitiveness of the nursing home market, and the stateMedicaid reimbursement rate structure are examined. Finally, the influ-ence of policies on hospice care in nursing homes is discussed. [Articlecopies available for a fee from The Haworth Document Delivery Service:1-800-342-9678. E-mail address: [email protected]]

KEYWORDS. Hospice, nursing homes, special care units, Medicare,Medicaid

In recent years the number of hospices in the U.S. have increased consid-erably. In 1993 the U.S. had approximately 2,000 hospice care providers ascompared with approximately 1,000 in 1983. Hospice care in nursing homesis an emergent trend constituting part of this growth. In the four years be-tween 1992 and 1996, the number of special care hospice units in nursinghomes has increased by over one hundred percent and now stands at a total of225. However, the emergence of hospice care within nursing homes is a trendabout which we have virtually no information.In this article recent data on nursing homes from the Health Care Financ-

Nicholas G. Castle is Director of Health Outcomes Research, AtlantiCare HealthSystems, 6727 Delilah Road, Egg Harbor Township, NJ 08234 (E-mail [email protected]).

Supported in part by the Agency for Health Care Policy and Research (AHCPR)Institutional National Research Award (# HS 00011) and the Health Care FinancingAdministration (HCFA) Changing Nursing Homes Grant (# 17C 90428).

Journal of Health & Social Policy, Vol. 11(2) 1999E 1999 by The Haworth Press, Inc. All rights reserved. 1

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JOURNAL OF HEALTH & SOCIAL POLICY2

ing Administration’s (HCFA) nationally representative Medicare/MedicaidAutomated Certification Survey (MMACS) are used in a descriptive analysisof nursing homes that contain special care hospice units. These nursinghomes are compared to nursing homes with other special care units and tothose without any special care units. An analysis of the determinants ofnursing homes with special care hospice units is also provided. Factors suchas ownership, staffing levels, having other special care units, case-mix inten-sity, competitiveness of the nursing home market, and the state Medicaidreimbursement rate structure are examined. Finally, the influence of policieson hospice care in nursing homes is discussed.

BACKGROUND

To understand the phenomenon of hospice in nursing homes it is importantto understand the origins and structure of the Medicare hospice benefit.Medicare reimbursement for hospice care begun in 1982 has undoubtedlyfueled some of the growth in hospice, as seen in the 10 year period followingthe addition of the hospice benefit to Medicare wherein the number of hos-pices increased by several hundred percent (Banaszak-Holl, Zinn, & Mor,1996; HCFR, 1995). As a backdrop to the investigation, this section will firstdescribe the origins and structure of the Medicare hospice benefit. As asecond important factor in the development of hospice in nursing homes, thenursing home as an increasingly important site of death for the elderly isdescribed. Subsequently, the possible benefits of nursing home-hospice ar-rangements are discussed.

The Medicare Hospice Benefit

In the 1980s, Congress responded to demands for increasing coverage ofhospice care. The National Hospice Education Project drafted legislation inDecember 1981 to make hospice care reimbursable under Medicare (Shalala,1993) in a bill sponsored jointly by Representative Leon Panetta and SenatorRobert Dole (H.R. 5180, S. 1958). Congress later approved Medicare reim-bursement for hospice care in 1982; however, they restricted payments to amaximum of 210 days of coverage for those beneficiaries with a terminalprognosis of six months or less (Public Law 97-248).In 1985, the Consolidated Omnibus Budget Reconciliation Act (COBRA)

amended Medicaid statutes to allow states the option of paying for hospiceservices for the terminally ill. The Omnibus Budget Reconciliation Act(OBRA) of 1986 mandated state support of hospice services for certainbeneficiaries in those jurisdictions that did not opt for the COBRA benefit.

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Nicholas G. Castle 3

OBRA required states to pay the hospice program at least 95% of the feesallocated under Medicaid for skilled nursing facility (SNF) or intermediatenursing facility (ICF) room and board expenses for those persons who electedto receive hospice care when they met the eligibility requirements of bothMedicare and Medicaid. In cases where the certified hospice program was aSNF or ICF, the facility was entitled to both the room and board paymentsand the payments for hospice services. These separate distinctions betweennursing homes being either SNF or ICF facilities were themselves ended aspart of the Nursing Home Amendments included in the OBRA of 1987.The federal regulations governing Medicare hospice payments continued

to change in response to continuing public advocacy, consumer concerns,industry interests, and published studies on hospice use. For example, prior to1989, federal policy discouraged hospice programs from accepting largenumbers of patients who would need extended periods of inpatient care orwhose prognosis might indicate a chance of survival beyond the 210 dayreimbursement limit. Policies also restricted hospices to a maximum amountof inpatient days, in the aggregate, totaling no more than 20% of all servicedays. However, effective January 1, 1989, as a result of passage of theMedicare Catastrophic Coverage Act (MCCA) of 1988 (MCCA, Public Law100-360), the 210 day care limit was eliminated and hospices could thusaccept patients with a broader range of diagnoses and prognoses. Althoughthe MCCA was repealed after one year, the 210 days-of-care limitation wasagain eliminated in the OBRA of 1990.While these changes were occurring in Medicare policies, the per diems,

which are paid on a prospective basis with adjustments for the type of careprovided, were increased for beneficiaries using hospice care. These perdiems made the provision of Medicare covered services increasingly enticingfor the nursing home industry. At their inception in 1983 the rates were$46.25 for routine home care, $358.67 for continuous home care, $55.33 forinpatient respite care, and $271.00 for general inpatient care (Gaumer &Stavins, 1992). The per diem for routine home care was increased in 1985.Since then increases across all types of care have occurred in 1985 ($10.00increase), 1986 (20% increase), 1990 (20% increase), and 1991 (5.2% in-crease). In addition, rates have been adjusted yearly to reflect inflation. The1996 rates were $92.32 for routine home care, $538.87 for continuous homecare, $95.50 for inpatient respite care, and $410.72 for general inpatient care.

The Nursing Home as a Site of Death

For most of this century the hospital has been a dominant site of death forthe elderly. During the 1980s, however, this changed when nursing homesemerged as the dominant site of death for the elderly. This change may havebeen augmented by Medicare’s prospective payment system (PPS) (Gaumer &

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Stavins, 1992). Deaths in the hospital setting consume greater quantities ofresources than when they occur in the nursing home (Brooks & Smyth-Sta-ruch, 1984; Merrill & Mor, 1993). Thus, the cost saving incentives encour-aged by the PPS may have influenced this shift in the site of death. This, inturn, may have precipitated hospice-nursing home arrangements.

Benefits of Nursing Home-Hospice Arrangements

Providing hospice care to terminally ill nursing home residents may posi-tively affect these residents as well as the organizations that serve them.Improvements in pain management can be attained using the hospice paincontrol philosophy since nursing homes can offer increased access totechnology that may not otherwise be available to the hospice. The needs ofthe terminally ill resident can also be more readily met with the availability ofqualified nursing home staff. Information can be shared among hospiceworkers and nursing home staff, perhaps providing for more complete assess-ment and care planning, and ultimately resulting in more continuity andimproved care.The nursing home-hospice arrangement can benefit both organizations’

efficiency in providing care. The ability to concentrate hospice clients inseveral nursing facilities may be less stressful to hospice nursing personnel aswell as cost effective due to economies of scale. The nursing home canbenefit from the knowledge of hospice staff. This may be manifest in theform of increased opportunity for nurse aides, exposure of the facility tovolunteers, and greater connection to the community. Since hospice is viewedas a very positive service agent in almost all communities, nursing homes thatbecome associated with hospice may experience an enhanced image in thecommunity. Also, financially, the nursing home could potentially reduce itsfixed costs for nursing staff while keeping the same occupancy rate.The increasing number of special care hospice units may also be a re-

sponse to the competitiveness of the market. Special care units are a specificnumber of beds identified by the facility for residents with specific needs ordiagnoses and include units for AIDS, dialysis, disabled children, head trau-ma, Huntington’s, ventilators, Alzheimer’s, and special rehabilitation (Banas-zak-Holl, Zinn, & Mor, 1996). The need to attract private pay residents hasprovided the nursing home industry with some competitive incentives toinnovate and specialize (Castle, Zinn, Brannon, & Mor, 1997). Offeringspecialty care, such as special care units, is one means of securing a competi-tive edge.Since we have virtually no information concerning nursing home-hospice

arrangements, in this article a descriptive analysis of nursing homes thatcontain special care hospice units and an analysis of the determinants of

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nursing homes with special care hospice units is provided. Finally, the influ-ence of policies on hospice care in nursing homes is discussed.

DATA AND METHODS

Data Sources

The data used in this investigation come from two sources: (1) the 1996MMACS, compiled annually in conjunction with state surveyors certificationsurvey visits, and (2) the 1996 Area Resource File (ARF).The 1996 MMACS contains data routinely collected through the nursing

home certification process (Castle & Banaszak-Holl, 1997). This data iscollected from approximately 18,000 facilities each year. There are approxi-mately 300 data elements in the MMACS, the majority of which are eitherinstitutional or aggregated resident data. Institutional data relevant to thisstudy includes bed size, system membership, ownership, the number of nurs-ing personnel (by job category and full-time equivalent (FTE) status), and theexistence of various special care units, such as hospice, dialysis, Alzheimer’s,and Huntington’s. Resident data relevant to this study includes limitations inactivities of daily living (ADLs) and the number of residents (by payercategory). Some U.S. nursing home facilities do not seek either Medicare orMedicaid certification and are not included in this survey. These facilitiesrepresent only 7% of all nursing home beds and are thus unlikely to have asignificant impact on this study.The 1996 ARF are data summarizing a large array of census, health and

social resource information for all counties in the contiguous United Statesand Alaska (Stambler, 1988). These data are compiled from a number ofdata sources including: the U.S. Census of Population and Housing, theCenters for Disease Control (CDC), the American Hospital Association(AHA) annual hospital survey, and the National Center for Health Statistics(NCHS).The data contained within the ARF are at the county level and are com-

monly used in health services research (e.g., Nyman, 1987; Nyman, 1989).However, some criticism of the use of county level data in health servicesresearch has been provided by Luft, Robinson, Garnick, Hughes, McPhee,and Hunt (1986), who suggest counties may not appropriately representmarket areas. Other researchers later found some utility in this approach(Garnick, Luft, Robinson, Maerki, & McPhee, 1987). Moreover, for nursinghomes, Banaszak-Holl, Zinn, and Mor (1996, p. 103) state that at the countylevel patterns of funding and patient origin are ‘‘reasonably approximate’’ tothe long-term care market.

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Analytic Approach

Including variables identified by other researchers as important in describ-ing special care units (Zinn & Mor, 1994) a descriptive analysis of nursinghomes that contain special care hospice units is first provided. These nursinghomes are compared to those with other special care units and to nursinghomes without hospice or other special care units. Data from the MMACSare used for this analysis representing 14,646 nursing homes. This excludeshospital based facilities, or facilities that are part of a retirement centerbecause they tend to be unrepresentative of other nursing homes in terms ofboth staff and clients (Burns & Taube, 1984).Second, an analysis of the determinants of nursing homes that contain

special care hospice units is provided. The unit of analysis for this investiga-tion is the nursing home. Using 1996 MMACS, 1996 ARF data, and informa-tion concerning the Medicaid reimbursement policy for each state (Harring-ton, DuNah, & Curtis, 1994), it is assumed that the probability of a nursinghome providing special care hospice units can be estimated as a multivariatelogistic regression function of institutional and market factors. The generallogistic regression model can be represented by the equation:

special care hospice unit = f (institutional factors + market factors+ control factors)

Institutional and market factors are examined because offering specialtyhospice care is one means of securing a competitive edge for the facility.Indeed, offering services such as hospice care are frequently motivated byinstitutional and market factors (Banaszak-Holl, Zinn, & Mor, 1996). Thevariables included in the analysis are important covariates for examining theeffects of competition. The institutional factors are: ownership (Davis, 1991;Elwell, 1984), system membership (Castle & Banaszak-Holl, 1997), bed size(Davis, 1991), staffing levels (Castle & Banaszak-Holl, 1997), overall occu-pancy rate (Spector & Takada, 1991), Medicaid occupancy rate (Spector &Takada, 1991), and special care units (other than hospice) (Zinn & Mor,1994). The market factors are: Herfindahl index (Pfeffer & Salancik, 1978),number of hospital beds (Banaszak-Holl, Zinn, & Mor, 1996), number ofelderly (Banaszak-Holl, Zinn, & Mor, 1996), average income (Banaszak-Holl, Zinn, & Mor, 1996), and state Medicaid reimbursement policy (Cohen &Dubay, 1990). Since these institutional and market factors may not adequate-ly adjust for medical factors that could precipitate nursing homes usingspecial care hospice units, other indicators in the MMACS were used ascontrol variables, including: ADLs, and the proportion of residents givenintravenous (IV), respiratory, and rehabilitation services.Table 1 shows how the variables are operationalized in this analysis. The

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TABLE 1. Operational Definition of Dependent and Independent Variables

VARIABLE OPERATIONAL DEFINITION

DEPENDENT VARIABLE:aHospice special care unit A specific number of beds designated to hospice care.

INDEPENDENT VARIABLES:INSTITUTIONAL FACTORS:aOwnership For-profit (0)* or not-for-profit (1).

System membership Whether member of a nursing home chain (0) or not (1).

Bed size Number of beds.

Nurse staffing levels FTE hours (a) RNs / per resident, (b) LPNs / perresident, and (c) nurse aides / per resident.

Specialist staffing levels FTE hours per resident of speech, occupational, andphysical therapists.

Overall census Average occupancy rate.

Medicaid census Average Medicaid occupancy rate.

Other special care units Includes units for: Alzheimer’s, AIDS, dialysis, disabledchildren, head trauma, Huntington’s, ventilators, andspecial rehabilitation.

MARKET FACTORS:bMarket competition Herfindahl index, computed at the county level. Based

on each facility’s percentage share of beds in thecounty / sum of the squared market shares of all facili-ties in the county.

Population greater than 65 The number of elderly in the county over age 65.

Average income in county The average income ($) of all persons in the county.

Number of hospital beds The number of hospital beds / 10,000 population inin county the county.

Medicaid reimbursement policyc Retrospective (0) or flat rate (1).

CONTROL FACTORS:aADLs Based on six items from the MMACS including trans-

fer, locomotion, dressing, eating, toilet use, bathing,and bladder continence.

Subacute services Includes physical rehabilitation, respiratory, and IVtherapy services.

* = Coding used for logistic regression analyses shown in parenthesesa = Data are from the Medicare/Medicaid Automated Certification Surveyb = Data are from the Area Resource Filec = Taken from Harrington, DuNah, and Curtis (1994)

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operational definitions of most of these variables are unambiguous; therefore,only the Herfindahl index and the state Medicaid reimbursement policy areexplained further. The Herfindahl index is a measure of how competitive thecounty market is where the facility is located. The index is constructed bycombining the squared market shares of all facilities in the county, anddetermining each facility’s percentage share of beds in the county. The result-ing scores range from 0 to 1, with 1 representing no competition and smallnumbers representing many homes each with a few percent of the market(White & Chirikos, 1988).State Medicaid reimbursement policies can also have a significant effect

on nursing homes. Facilities operating under retrospective reimbursement arereimbursed for actual costs incurred, whereas, prospective payment is morelikely to pay a flat rate. As Banaszak-Holl, Zinn, and Mor (1996, p. 103) state‘‘compared to retrospective reimbursement, payment of a flat rate makes itmore difficult to anticipate coverage for the costs of care.’’ Retrospectivereimbursement and payment of a flat rate are used in this analysis.

RESULTS

The results of the descriptive analyses are presented in Table 2. For thethree groups of nursing homes (1) with hospice units, (2) with other specialcare units, and (3) those facilities without either hospice or special care units,no trend was evident with regard to ownership, system membership, bed size,FTE LPNs, FTE RNs, and FTE nurse aides. Other results are instructive,however. For example, Medicare as a source of payment is more common innursing homes with hospice units, whereas it is less common in the othernursing homes. Eight percent of nursing homes without hospice or specialcare units have greater than 50% of their census as Medicare residents, while14% of nursing homes with hospice special care units have greater than 50%of Medicare residents. Conversely, 34% of nursing homes without hospice orspecial care units have no Medicare residents, while 25% of nursing homeswith hospice special care units have no Medicare residents.Substantially more nursing homes with hospice special care units have a

full-time medical director (8%); 4% of nursing homes with other special careunits have a full-time medical director, while only 3% of nursing homeswithout hospice or special care units have a full-time medical director. Occu-pancy levels are higher in both nursing homes without special care units orhospice units (75% > 90% occupancy) and with other special care units (72% >90% occupancy), as compared to nursing homes with hospice special careunits (68% > 90% occupancy) .Finally, as one might expect, specialized services (IV, respiratory, and

rehabilitation services) are higher in nursing homes with hospice units as

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TABLE 2. Descriptive Analyses of Nursing Homes with Hospice Special CareUnits, Other Special Care Units, or No Special Care Units

Variable Hospicea (%) Other Care No Hospice orSpecial Special Unitb Special Care UnitcCare Unit

For-profit 115 (70%) 1613 (68%) 9006 (74%)System member 85 (52%) 1396 (59%) 6328 (52%)Bed size:

small (<100) 64 (39%) 616 (26%) 6718 (55%)medium (100-200) 71 (43%) 1349 (57%) 4660 (38%)large (>200) 29 (18%) 373 (16%) 661 (5%)

Overall census:<=90% 53 (32%) 669 (28%) 3071 (25%)>90% 111 (68%) 1692 (72%) 9063 (75%)

Medicare census:None 45 (25%) 460 (19%) 4980 (34%)<=5% 38 (21%) 605 (25%) 3222 (22%)5-10% 40 (22%) 629 (26%) 4101 (28%)10-15% 18 (10%) 290 (12%) 1757 (12%)15-50% 25 (14%) 289 (12%) 878 (6%)>50% 26 (14%) 169 (7%) 1172 (8%)

Medicaid census:None 34 (19%) 169 (7%) 1758 (12%)<=50% 40 (22%) 532 (22%) 2490 (17%)50-75% 68 (38%) 1065 (44%) 5126 (35%)75-90% 31 (17%) 508 (21%) 4393 (30%)90-95% 5 (3%) 97 (4%) 879 (6%)>95% 11 (6%) 122 (5%) 1025 (7%)

FTE RNs/resident:<=.04 167 (93%) 2299 (95%) 13328(91%)>.04 13 (7%) 121 (5%) 1318 (9%)

FTE LPNs/resident:<=.1 113 (63%) 1525 (63%) 9959 (68%)>.11 67 (37%) 895 (37%) 4686 (32%)

FTE of nurse aides/resident:<=.3 104 (58%) 1331 (55%) 7762 (53%)>.35 76 (42%) 1089 (45%) 6883 (47%)

MD on site 175 (97%) 23232(96%) 14060(96%)Full time medical director 14 (8%) 97 (4%) 439 (3%)Residents receive:

IV therapy 76 (42%) 774 (32%) 3222 (22%)Respiratory therapy 148 (82%) 2081 (86%) 11570(79%)Rehabilitation 117 (65%) 1452 (60%) 7030 (48%)services

aN = 180 facilitiesbN = 2,420 facilitiescN = 14,646 facilities

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compared to others. The differentials for IV services are the greatest. Forty-two percent of nursing homes with hospice units provide IV services. Thirty-two percent of nursing homes with other special care units provide IV ser-vices while 22% of nursing homes without special care units or hospice unitsprovide IV services.Two other descriptive analyses are not included in Table 2. First, the

Census methodology was used to divide the U.S. into nine divisions: Pacific,Mountain, West North Central, West South Central, East North Central, EastSouth Central, New England, Middle Atlantic, and South Atlantic. TheMiddle Atlantic division has disproportionately fewer hospice special careunits (4%) than the other divisions (7-21%). Second, analyses indicate that 93(52%) nursing homes with hospice special care units also have at least oneother special care unit.The results of the logistic regression analyses are presented in Table 3.

This shows for-profit ownership (Adjusted Odds Ratio (AOR) = 1.2; p < .1),facility size (AOR = 1.3; p < .05), other special care units (AOR = 4.75; p <.001), Herfindahl index (AOR = 1.43; p < .05), the number of hospital beds inthe area (AOR = 0.41; p < .01), and average income in the county (AOR =1.43; p < .05) are all significant. A pseudo-R2 of 0.15, specificity of 76%, anda Pearson’s Chi-square of 184 (p = 0.0001), indicate that the model fits thedata well.

DISCUSSION

Anecdotal evidence from a number of hospices across the country sug-gests that home based hospices are establishing relationships with nursinghomes to provide nursing care to terminally ill residents. This arrangement ispermissible even for Medicaid reimbursed nursing home residents, becauseMedicaid continues to pay ‘‘room and board’’ as well as the personal care, inthe form of the nurse’s aide component of the resident’s care. Hospice paysfor and provides the nursing care and receives the home care hospice perdiem rate. Thus, the nursing home serves as the patient’s home and thenurse’s aide as the primary care person.Other evidence for this growing practice can be found from HCFA’s

MMACS files of nursing home certification surveys. One item of data pres-ent in this annual survey since 1991 is the presence of various types ofspecialty care units in the nursing home, including hospice units. Analysis ofthese data shows over 100% growth in such units between 1991 and 1996.Since there are very few nursing home based hospices, it must be the casethat this growth has occurred in response to increasingly prevalent relation-ships between nursing homes and hospices.Recent data on nursing home residents from HCFA’s MMACS reveals that

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TABLE 3. Logistic Regression Odds Ratios for Nursing Homes with HospiceSpecial Care Units

Independent Odds 95% ConfidenceVariable Ratio Interval

INSTITUTIONAL FACTORS:For-profit ownership 1.20+ 1.00-1.38System membership 0.87 0.63-1.2Bed size 1.30* 1.0-1.72FTE RNs per resident 0.96 0.75-1.23FTE LPNs per resident 1.29 0.92-1.81FTE nurse aides per resident 0.86 0.56-1.11FTE specialists per resident 0.96 0.58-1.57Overall census 0.72 0.32-1.65Medicaid census 0.85 0.42-1.74Other special care units 4.75*** 3.45-6.52

MARKET FACTORS:Herfindahl index 1.43* 1.02-2.40Number of hospital beds in county 0.44** 0.2-0.97Population greater than 65 1.22* 1.04-1.44Average income in county 0.54 0.22-1.32Medicaid reimbursement policy 1.39 1.0-1.95

CONTROL FACTORS:ADLs 0.35* 0.10-1.0IV services 0.27 0.02-4.19Respiratory services 1.55 0.31-7.71Rehabilitation services 0.67 0.29-1.52

N = 14,646 Pseudo-R2 = 0.15Sensitivity = 61% Specificity = 76%Concordant = 70% Discordant = 23%

Pearsons Chi-Square for the full model = 184 (p = 0.0001).

+ Statistically significant at the 0.1 level or better.* Statistically significant at the 0.05 level or better.** Statistically significant at the 0.01 level or better.*** Statistically significant at the 0.001 level or better.

15% of all 18,000 Medicare/Medicaid certified nursing homes in the UnitedStates house at least one Medicare hospice beneficiary. The average numberof hospice patients per facility is 3, yielding about 8,100 Medicare hospicebeneficiaries in nursing homes on any given day. Given the number of Medi-care hospice beneficiaries in 1995 (280,000) and their length of stay, it can beestimated that about one quarter of all Medicare hospice beneficiaries residein a nursing home on any given day.The nursing home-hospice arrangement may be mutually beneficial to

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both providers. Provision of hospice care to nursing home residents opens thedoor for ‘‘double dipping’’ by receiving Medicare hospice payments andMedicaid payments for nursing home residence. Under current regulations,the state Medicaid agency pays the nursing home 95% of the full Medicaidreimbursement and the hospice is to provide the nursing services needed bythe individual resident. At more than $100 per day for a hospice home careday, having numerous patients in a single facility concentrates a lot of re-sources into a single setting. Hospices could place a full-time nurse into thefacility, resulting in a nurse to patient ratio that is much higher than would bethe case in any other nursing home and still be able to ‘‘cross-subsidize’’ theirregular home care patients. Since reimbursement is prospectively determinedrather than cost based, the provision of care to hospice patients in a nursinghome setting is likely to be a highly ‘‘profitable’’ activity which hospices canuse to offset the expense of high cost, outlier patients needing to be servedintensively at home (McMillan, Mentnech, Lubitz, McBean, & Russell,1990). Since the original basis for determining the rates for hospice homecare days was the average number of visits to home care patients living athome in dispersed settings, applying the same payment rate to a ‘‘congre-gate’’ setting clearly takes advantage of economies of scale. Additionally, the210 day limit on hospice enrollment, which appears to have restrained thewillingness of hospice to admit patients to nursing homes with other than acancer diagnosis because of the greater variability in expected survival, waspermanently eliminated. This means that hospices can admit patients with anon-cancer diagnosis and not worry about retaining clinical responsibility forthe case even after their hospice benefits are exhausted.This analysis is at the facility level and is not able to show evidence of

double dipping or any other of the advantages of nursing home-hospiceprovisions. However, the results do show that despite the advantages ofnursing home-hospice provisions these arrangements do not occur randomly.For example, the logistic regression analysis may be instructive in that theinfluence of both institutional and market factors are clearly apparent on theprobability of a nursing home providing a hospice special care unit. Owner-ship (for-profit versus not-for-profit), having other special care units, Herfin-dahl index (a measure of competition), and the number of hospital beds in thearea are significant factors in this analysis.One could speculate that for-profit nursing homes may have realized the

potential profit in hospice arrangements. Alternatively, for-profit nursinghomes may enhance their image in the community. Having other special careunits is a potential indicator of economies of scale, and as such may facilitatenursing home-hospice arrangements. Competition from other nursing homesand hospitals may be driving some nursing homes to diversify their product

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base and clientele, and may account for the positive association between theHerfindahl index and the number of hospital beds in the area.This analysis of nursing homes with hospice special care beds is subject to

data limitations. For example, all hospice-nursing home arrangements havenot been investigated; rather, the investigation is conservative in that onlynursing homes with a hospice special care unit are investigated. Other nurs-ing homes may have formal arrangements with hospice, but may not specifythis in their yearly MMACS evaluation. Similarly, nursing homes with ahospice special care unit may not have formal arrangements with other hos-pice providers. Thus, although it may be instructive to investigate all hospice-nursing home arrangements this analysis relates only to a sub-set of thesearrangements. The logistic regression analysis of the determinants of nursinghomes that collaborate with hospices is also limited. Other measures ofcase-mix intensity and the competitiveness of the hospice market wouldproduce a more complete picture of the determinants of nursing homes thatcontain hospice special care units.

POLICY IMPLICATIONS

The number of hospices in the U.S. continues to grow. In the 10 yearperiod following the addition of the hospice benefit, the number of hospicesincreased by several hundred percent (Bishop & Skwara, 1993). Data fromthe 1993 National Home and Hospice Care Survey (NHHCS) reveal that theproportion of Medicare certified hospices rose to 71% between 1992 and1993. Likewise, the number of Medicare eligible persons receiving hospicecare increased to over 50,000 in 1993, due both to the increase in the Medi-care eligible population as well as the growth in the industry. This growth inthe provision of hospice services resulted in an overall increase in Medicareexpenditures. For the period 1987-90, the average expenditure per Medicarebeneficiary for hospice rose from $77 to $88 per day. Most of this reimburse-ment was for ‘‘routine home care services’’ (Strahan, 1994). Estimates of thetotal cost of the hospice benefit to the Medicare program in 1993 can bepresumed to be over $2 billion.There are several clinical benefits that might be associated with having

hospice care services provided to nursing home residents. From HCFA’sstandpoint, however, it may be the case that providing routine home hospicecare in a nursing home may reduce the propensity of terminally ill residentsin a facility being admitted to a hospital to die. Indeed, if the educational andresource enhancement benefits hypothesized above are borne out, the overallhospitalization rate of nursing home residents may be lower in a facility thathas an arrangement with a hospice.The rate of hospitalization of nursing home residents varies tremendously

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from facility to facility and area to area. Analyses of hospitalization ratesexperienced by the sample of residents and facilities included in the evalua-tion of the Minimum Data Set (MDS) revealed two-fold differences in thehospitalization rates as a function of state, across the 10 states included in thestudy, with the lowest rate being in Oregon and the highest in Texas (Mor,Intrator, Hiris et al., 1996). Furthermore, in additional analyses of these samedata, others have found that the likelihood of hospitalization is significantlyassociated with the level of nursing resources in the facility as well as thenumber of hospital beds per thousand in the area in which the facility islocated (Intrator, Castle, & Mor, in press). These analyses suggest that moreresources provided to the nursing home in the form of an arrangement with ahospice for the provision of care for some portion of the facilities’ residentscould result in a lowering of the hospitalization rate. Indeed, while the num-ber of facilities reporting a designated hospice unit is too small in the MDSevaluation sample to be able to test this proposition, preliminary findings aresuggestive that the risk of hospitalization is modified by the presence of aspecial care unit in the facility.HCFA has limited information about a phenomenon that is presumed to be

fueling a good part of the observed growth in the hospice program. In view ofthe astronomical growth that has occurred in the home health benefit (HCFAReview Supplement, 1995), it would be informative to conduct analyses ofthe growth in the program in relation to clarification of the use of the nursinghome as a site of care, and in relation to the elimination of the 210 daycoverage limit. There is already evidence that during the MCCA the propor-tion of cases exceeding the 210 day limit increased and dropped again once itwas reinstated. With its final elimination by law, it is likely that averageenrollment period will continue to increase, particularly as the proportion ofall hospice patients who are in nursing homes increases and the proportion ofnon-cancer diagnoses increases.

CONCLUSION

Since the Medicare hospice benefit was originally structured specifically tofacilitate care of dying patients in their own homes, the transformation of thebenefit to provide terminal long-term care services in the nursing home contextis an important development in hospice care. This development was probablyfueled by Medicare reimbursement for hospice care, nursing homes becomingan increasingly important site of death for the elderly, and benefits to bothhospice and nursing homes through nursing home-hospice arrangements. How-ever, the emergence of hospice care in the nursing home is a trend about whichwe have virtually no information. In this article a descriptive analysis of nursinghomes that contain special care hospice units is provided. These nursing homes

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are compared to nursing homes with other special care units and to nursinghomes without any special care units. This has been followed by an analysis ofthe determinants of nursing homes with special care hospice units.The results show that despite the advantages of nursing home-hospice

provisions these arrangements do not occur randomly. For example, the lo-gistic regression analysis is instructive in that the influence of both institu-tional and market factors are clearly apparent on the probability of a nursinghome providing a hospice special care unit. Ownership (for-profit versusnot-for-profit), having other special care units, Herfindahl index (a measureof competition), and the number of hospital beds in the area are all significantin this analysis.In summary, these results provide some insight into the forces driving

nursing home-hospice arrangements. Economic factors such as profits, econ-omies of scale, and competition may be important. Economically motivatedservice developments such as these are not necessarily negative develop-ments. However, profits and quality sometimes move in contrary directions.Therefore, it may be prudent to examine further the development of specialcare hospice units in nursing homes paying particular attention to quality.

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hospice and nursing homes

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