Skilled Nursing Facilities: CMS Should Improve Accessibility and Reliability of Expenditure Data
Published: 2016-09-07T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Medicare paid $28.6 billion to SNFs for nearly 1.7 million beneficiaries in 2014. About 15,000 SNFs provide short-term skilled nursing and rehabilitative care after an acute care hospital stay. As of 2014, 70 percent of SNFs were for-profit, 24 percent were nonprofit, and 5 percent were government-operated. About three-fifths of the SNFs were affiliated with chains. The average SNF Medicare margin was 12.5 percent. Some researchers have questioned whether SNF margins come at the expense of patient care in the form of low nurse staffing levels.
GAO was asked to provide information on how SNFs spend their Medicare and other revenues. GAO examined (1) the extent to which the expenditure data CMS collects from SNFs and provides to the public are accessible and reliable, (2) how SNF costs and margins vary by facility characteristics, and (3) how SNF nurse staffing levels vary by facility characteristics and the relationship between SNF nurse staffing levels and margins. GAO analyzed Medicare cost report data for fiscal years 2011 through 2014, the most recent years with complete data available. GAO also interviewed CMS officials, researchers, and beneficiary advocates.
section_title: What GAO Found
paragraphs: The Centers for Medicare & Medicaid Services (CMS)—the agency within the Department of Health and Human Services (HHS) that administers Medicare—collects and reports expenditure data from skilled nursing facilities (SNF), but it has not taken key steps to make the data readily accessible to public stakeholders or to ensure their reliability. SNFs are required to self-report their expenditures in annual financial cost reports, and CMS posts the raw data on its website. However, CMS has not provided the data in a readily accessible format and has not posted the data in a place that is easy to find on its website, according to public stakeholders and GAO's observations. In addition, CMS does little to ensure the accuracy and completeness of the data. Federal internal control standards suggest that agencies should make data accessible to the public and ensure data reliability. Until CMS takes steps to make reliable SNF expenditure data easier to use and locate, public stakeholders will have difficulty accessing and placing confidence in the only publicly available source of financial data for many SNFs.
GAO found that, for each fiscal year from 2011 through 2014, direct and indirect care costs were lower as a percentage of revenue, on average, at for-profit SNFs compared with nonprofit and government SNFs. Direct and indirect care costs were similarly lower at chain SNFs compared with independent SNFs. In addition, the median margin, which measures revenue relative to costs, was higher for for-profit and chain SNFs than for other SNFs in each of the 4 years.
The relationship between SNFs' nurse staffing levels (hours per resident day) and their margins varied by ownership type in each fiscal year from 2012 through 2014, the 3 years with complete staffing data. For-profit SNFs generally had lower nurse staffing ratios than did nonprofit and government SNFs. Examining each fiscal year separately, GAO estimated that a SNF's margin had a small, but statistically significant, effect on its case-mix adjusted (that is, adjusted for residents' health care needs) nurse staffing ratios. For example, for each percentage point increase in a for-profit SNF's margin in fiscal year 2014, GAO estimated that the SNF's total nurse staffing ratio (including registered nurses, licensed practical nurses, and certified nursing assistants) decreased by 4.1 minutes per resident day after controlling for other factors. However, in GAO's analyses, these other factors, such as geographic location, were more important predictors of a SNF's case-mix adjusted nurse staffing ratios.
section_title: What GAO Recommends
paragraphs: GAO recommends that CMS (1) improve public stakeholders' ability to locate and use SNF expenditure data and (2) ensure the accuracy and completeness of the data. HHS concurred with the first but not the second recommendation, citing resource considerations. GAO continues to believe that CMS should provide reliable SNF expenditure data.

section_title: Letter
paragraphs: Medicare paid $28.6 billion to skilled nursing facilities (SNF) for nearly 1.7  million beneficiaries in 2014. The nation’s approximately 15,000 SNFs  provide short-term skilled nursing and rehabilitative care to Medicare  residents following an acute care hospital stay. Most SNFs are distinct  units (such as buildings, floors, or wings) within nursing homes that also  provide long-term care, which Medicare does not cover. Medicare SNF  residents include those recovering from surgeries, such as joint  replacements, and health conditions, such as stroke and pneumonia.
To participate in Medicare, SNFs must meet minimum federal quality and  life-safety standards and must submit annual cost reports. The cost  reports are the only publicly available source of financial data for many  SNFs. The reports also capture information on facility characteristics and  nurse staffing levels. The Centers for Medicare & Medicaid Services  (CMS), the agency that administers Medicare, provides the cost report  data to the public and uses the data to update SNF payment rates. Public  stakeholders, such as beneficiary advocates and researchers, could use  the cost report data to compare SNFs’ costs for resident care, among  other things. SNFs participating in Medicare can decide how much to  spend on resident care and other costs and how much to retain. In 2014,  the average SNF Medicare margin, which measures payments relative to  costs, was 12.5 percent.
Some researchers have questioned whether SNFs’ margins are coming  at the expense of resident quality of care in the form of low nurse staffing  levels. For example, to increase their margins, SNFs could reduce  staffing levels or provide residents with fewer or a less expensive mix of  services. SNFs employ three types of nursing staff: registered nurses  (RN), licensed practical nurses (LPN), and certified nursing assistants  (CNA). Previous research has demonstrated that higher nurse staffing  levels—particularly RN staffing levels—are associated with higher quality  of care. In addition, our past work suggests that SNF ownership type  (for-profit, nonprofit, or government) and chain affiliation (chain or  independent) may be associated with staffing levels and quality of care.  For example, we found in October 2015 that nursing homes that  consistently performed poorly on selected quality measures between  2011 and 2014 were more likely to be for-profit or large homes (greater  than 100 beds) compared with homes that performed well. In July 2011,  we found that nursing homes owned by private investment firms had  lower reported average total nurse staffing levels and more quality of care  problems identified in inspections compared with other homes. Industry  representatives contend that SNFs prioritize high-quality care despite  pressure to manage operating costs within reimbursement constraints.
You asked us to provide information on how SNFs spend their Medicare  and other revenues and how spending may vary by facility characteristics.  In this report, we examine  1.  the extent to which the expenditure data CMS collects from SNFs and  provides to the public are accessible and reliable,  2.  how SNF costs and margins vary by facility characteristics, and  3.  how SNF nurse staffing levels vary by facility characteristics and the  relationship between SNF nurse staffing levels and margins.
To examine the extent to which the expenditure data CMS collects from  SNFs and provides to the public are accessible and reliable, we reviewed  SNF expenditure data requirements in the Patient Protection and  Affordable Care Act (PPACA) and Medicare cost report documentation.  We also compared CMS’s expenditure reporting with that of another  organization, the California HealthCare Foundation, which publicly reports  cost, finance, and quality measures for nursing homes in the state on its  CalQualityCare.org website. In addition, we interviewed CMS officials,  two academic researchers who have studied this topic for many years,  and representatives from two beneficiary advocacy organizations familiar  with SNF expenditure data to obtain their views on CMS’s expenditure  reporting. We also contacted two SNF trade associations.  Representatives from one association told us they did not have expertise  on cost reporting, and representatives from the second association did  not respond. Finally, we reviewed CMS’s efforts to make SNF  expenditure data accessible to the public and to ensure the reliability of  the data against the relevant standards for internal control in the federal  government.
To examine how SNF costs and margins vary by facility characteristics,  we analyzed Medicare cost report data for fiscal years 2011 through  2014—the most recent years with complete data available as of July  2015, when we began our analyses. While the cost reports include some  data related specifically to Medicare residents, they also contain data for  all facility residents regardless of payer. Generally, the cost reports cover  a 12-month period of operations and reflect SNFs’ fiscal years, which  comprise different ranges of months. We first organized each SNF’s costs  into four categories: direct care, indirect care, capital-related assets, and  administrative services. We then calculated how much each SNF spent  for each category as a percentage of revenue and computed each SNF’s  margin, reflecting the percentage of revenue each SNF retained. We then  compared SNF costs and margins by ownership type and chain affiliation.
To examine how SNF nurse staffing levels vary by facility characteristics  and the relationship between SNF nurse staffing levels and margins, we  first used nurse work time as a proxy for nurse staffing levels. Using cost  report data, we calculated each SNF’s total nurse time worked (RNs,  LPNs, and CNAs combined) and total RN time worked, and expressed  the totals as a ratio of nurse time per resident day. Because the time  needed for treating residents varies with their clinical conditions and  treatments, we adjusted each SNF’s staffing ratios on the basis of its  Medicare residents’ health care needs. This process is known as case- mix adjustment. We then used multiple linear regression analysis, a  statistical procedure that allowed us to assess the relationship between a  SNF’s margin and its case-mix adjusted total nurse and total RN time per  resident day, controlling for other factors. The other factors in our models  included a SNF’s average hourly RN wage, average resident length of  stay, chain affiliation, number of beds, number of competitors within 15  miles, ownership type, proportion of Medicare days, and urban or rural  status. Our models also accounted for the state where each SNF was  located. We restricted our analyses to fiscal years 2012 through 2014  because nurse staffing data were incomplete for fiscal year 2011 and  were generally unavailable beyond fiscal year 2014 when we began our  analyses. For each of the 3 years, we performed analyses for all SNFs  and by ownership type and chain affiliation.
We limited our analyses of Medicare cost report data to freestanding  SNFs—that is, those not based in a hospital—in the 50 states and  Washington, D.C. We excluded hospital-based SNFs from our analyses  because their costs may be driven in part by hospitals’ methods for  allocating overhead costs among departments. In addition, CMS requires  hospital-based SNFs to submit the Medicare hospital cost report, which  does not gather SNF direct care staffing data, rather than the SNF cost  report. The Medicare Payment Advisory Commission reported that  hospital-based SNFs accounted for 5 percent of all SNFs and 3 percent  of Medicare SNF spending in 2014.
The Medicare cost report data we used for our analyses had some  limitations. Although the cost reports provided the most suitable data for  our analyses, they are not routinely audited and are subject to limited  verification. In addition, because SNFs are not reimbursed directly on the  basis of their costs, the level of effort SNFs put into accurately completing  the cost reports is uncertain. Furthermore, prior research has  demonstrated that it is possible for SNFs to conceal profit in management  fees, lease agreements, interest payments to owners, and purchases  from related-party organizations. It is not possible to detect this activity  using cost report data. To the extent that profit is “hidden” in various cost  categories, our findings may understate a SNF’s margin.
We took several steps to assess the reliability of the Medicare cost report  data we used in this report. We interviewed CMS officials, reviewed cost  report documentation, and excluded SNFs that reported implausible  values for their costs, revenues, nursing hours, number of beds, and  number of inpatient days. We used standard statistical techniques to  identify outliers and eliminate SNFs that reported extreme values among  the dependent variables used in our regression analyses as well as SNFs  whose reported values had a disproportionate effect on our regression  results. Finally, because SNFs sometimes file more than one cost report  for a single fiscal year (e.g., amended or partial year reports), we ensured  that each SNF we included had only one cost report per year. Our  exclusions removed between 5 percent and 14 percent of all SNFs that  submitted a cost report each year. Our final population ranged from  11,132 to 13,255 SNFs in each year. On the basis of these steps, we  concluded that the Medicare cost report data were sufficiently reliable for  the purposes of this report. See appendix I for additional detail on the  methods and results of our expenditure analyses.
We conducted this performance audit from July 2015 to September 2016  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: To qualify for SNF care, Medicare beneficiaries typically need to be  admitted to a SNF within 30 days after discharge from a hospital stay of  at least 3 days and need care for a condition that was treated during the  hospital stay or that arose while receiving SNF care. Medicare may cover  up to 100 days per episode of SNF care. Many SNFs also provide long- term care, which Medicare does not cover, to Medicaid or private paying  residents. Medicaid, the joint federal-state program for certain low-income  individuals, is the primary payer for over 60 percent of SNF residents.  Industry advocates have raised questions about Medicaid payment rates  in many states being lower than the costs of providing care. While  Medicare and Medicaid separately certify SNFs, nearly all SNFs have  dual certification and participate in both programs. SNF residents who do  not qualify for Medicare or Medicaid may have private insurance pay for  their care or they may pay out of pocket.
subsections: section_title: SNF Characteristics
paragraphs: SNFs differ by type of ownership. As of 2014, 70 percent of SNFs were  for-profit, 24 percent were nonprofit, and 5 percent were operated by  government agencies. In general, for-profit SNFs have a goal of making  profits that are distributed among their owners and stockholders. For  example, several studies have demonstrated that for-profit SNFs  generally have lower nurse-to-resident staffing ratios compared with  nonprofit SNFs, likely allowing them to reduce their personnel costs and  increase their margins. Nonprofit SNFs receive favorable tax status  because they are not allowed to operate for the benefit of private  interests.
SNFs also vary by chain affiliation. About three-fifths of SNFs were  owned or operated by chains (entities that own multiple facilities), while  the remainder were independent in 2014, the latest year for which data  were available. While most chain-affiliated SNFs are for-profit, some are  nonprofit or government-operated. Chains may develop complex  administrative structures to spread expenses across multiple SNFs.  Researchers have raised questions about the effects of chain ownership  on SNF quality of care.
section_title: SNF Nurse Staffing and Quality of Care
paragraphs: SNFs employ three types of nursing staff: RNs, LPNs, and CNAs. As we  have previously reported, the responsibilities and salaries of these three  types of nurses are related to their levels of education. The staffing mix,  or the balance SNFs maintain among RNs, LPNs, and CNAs, is generally  related to the needs of the residents served. For example, a higher  proportion of RNs may be employed to meet residents’ needs in SNFs  that serve more residents with acute care needs or in SNFs with specialty  care units (such as units for residents who require ventilators). However,  SNFs may be unable to pursue their ideal staffing mix for reasons such  as high turnover among LPNs and CNAs.
Licensed Nurses and Nurse Aides
Registered nurses (RN) have at least a 2-year degree and are  licensed in a state. Because of their advanced training and ability  to provide skilled nursing care, RNs are paid more than other  nursing staff. Generally, RNs are responsible for managing  residents’ nursing care and performing complex procedures,  such as starting intravenous feeding or fluids.
Licensed practical nurses (LPN) have a 1-year degree, are  also licensed by the state, and typically provide routine bedside  care, such as taking vital signs.
Certified nursing assistants (CNA) are nurse aides or orderlies  who work under the direction of licensed nurses, have at least 75  hours of training, and have passed a competency exam. CNAs’  responsibilities usually include assisting residents with eating,  dressing, bathing, and toileting. CNAs typically have more  contact with residents than other nursing staff and provide the  greatest number of hours of care per resident day. CNAs  generally are paid less than RNs and LPNs.
There are no federal minimum standards linking SNFs’ nurse staffing to  the number of residents, but SNFs that participate in both Medicare and  Medicaid are required to have sufficient nursing staff to provide nursing  and related services to allow each resident to attain or maintain the  highest practicable physical, mental, and psychosocial well-being. In  general, every SNF must have licensed nurses (RNs or LPNs) on duty  around the clock, including one RN on duty for at least 8 consecutive  hours per day, 7 days per week. According to one study, 34 states had  established additional minimum requirements for the number of nursing  hours per resident day as of 2010.
Researchers have found that higher total nurse staffing levels (RNs,  LPNs, and CNAs combined) and higher RN staffing levels are typically  associated with higher quality of care, as shown by a wide range of  indicators. For example, lower total nurse and RN staffing levels have  been linked to higher rates of deficiency citations, which may involve  actual harm or immediate jeopardy to residents. In addition, higher total  nurse and RN staffing levels have been associated with better health  outcomes, such as fewer cases of pressure ulcers, urinary tract  infections, malnutrition, and dehydration, as well as improved resident  functional status. In 2001, a CMS contractor reported the effect of nurse  staffing on quality of care in SNFs. The contractor identified staffing  thresholds in both a short-stay sample of Medicare SNF admissions and  a long-stay sample of nursing home residents who were in the facility for  at least 90 days. These thresholds demonstrated incremental benefits of  nurse staffing; once these thresholds were met, there were no additional  benefits in terms of quality. For the short-stay sample, the thresholds  were 0.55 hours per resident day for RNs and 3.51 hours per resident day  for all nurses. For the long-stay sample, the thresholds were 0.75 hours  per resident day for RNs and 4.08 hours per resident day for all nurses.
section_title: PPACA Requirements for Reporting SNF Expenditures
paragraphs: PPACA required SNFs to separately report expenditures for wages and  benefits for direct care staff, including specific data on RNs, LPNs, CNAs,  and other medical and therapy staff, and required CMS to redesign the  cost report in consultation with private sector accountants experienced  with SNF cost reports to meet this requirement. The act also required  CMS, in consultation with others, to categorize the expenditures listed on  the cost report, regardless of any source of payment for such  expenditures, into four functional accounts—direct care (including  nursing, therapy, and medical services), indirect care (including  housekeeping and dietary services), capital assets (including building and  land costs), and administrative services—annually. Finally, the act  required CMS to make information on SNFs’ expenditures “readily  available to interested parties upon request.”
section_title: CMS Has Not Made SNF Expenditure Data Readily Accessible and Does Not Adequately Ensure Data Reliability
subsections: section_title: CMS Has Not Taken Steps Needed to Make SNF Expenditure Data Posted on Its Website Readily Accessible
paragraphs: CMS collects detailed SNF expenditure data in Medicare cost reports and  posts the raw data on its website for the public. On their cost reports,  SNFs must disclose total costs and allocate general services costs such  as housekeeping and nursing administration. CMS officials told us they  modified the cost report as required by PPACA in December 2011.  Effective for cost reporting periods beginning on or after January 1, 2012,  CMS required SNFs to provide expenditure data for full-time and part- time direct care employees who are directly hired and under contract.  CMS officials said the agency implemented the PPACA requirement to  make information on SNFs’ expenditures “readily available to interested  parties upon request” by posting the raw data on its website. The CMS  website contains the raw cost report data that SNFs submitted for fiscal  years 1995 through 2015. The website also notes that CMS “has made a  reasonable effort to ensure that the provided data/records/reports are up- to-date, accurate, complete, and comprehensive at the time of  disclosure.”
However, CMS has not taken two key steps to make SNF expenditure  data readily accessible on the basis of our interviews with public  stakeholders and our observations. First, CMS has not provided the  expenditure data in an accessible way. The data’s format, volume, and  organization can make it difficult for public stakeholders to use the data.  CMS posts data for each fiscal year across three separate files. Because  of how CMS formats the data, users need certain software packages and  programming skills to analyze data for each fiscal year. In addition, CMS  has acknowledged that the data files are so large that some users have  been unable to download them. One of the researchers we interviewed  stated that the amount of time needed to analyze the data typically  requires a grant. CMS also does not organize SNF expenditures in a  meaningful way for analysis. For example, 12 of the 15 cost centers in the  general services category are related to indirect care, so a user must  make additional calculations to determine a SNF’s total indirect care  costs. Second, CMS has not provided the expenditure data in a place that  is easy to find on its website. For example, representatives of the two  beneficiary advocacy organizations we interviewed told us they were  unable to find the cost report data on the CMS website and noted the  importance of making the SNF expenditure data easy to locate.
CMS officials told us they did not know who would use SNF expenditure  data or for what purpose. Public stakeholders could make better use of  SNF expenditure data if CMS took steps to make the data more  accessible. For example, representatives of the two beneficiary advocacy  organizations and one researcher we interviewed said CMS could  incorporate summary expenditure measures into Nursing Home  Compare, the CMS website that contains summary measures of SNF  quality. Prior research has demonstrated that presenting cost and finance  measures in a manner that consumers can easily interpret, displaying  them alongside quality data, and focusing on information that is relevant  to consumers can help increase their effectiveness. For example, the  California HealthCare Foundation’s CalQualityCare.org website provides  ideas on how to communicate SNF expenditure measures to consumers.  This website allows consumers to find facility data and compare long-term  care providers across California.
CMS officials told us that adding SNF expenditure measures to Nursing  Home Compare is a possibility in the next 2 to 5 years. The officials noted  that, as of December 2015, CMS had not begun considering the posting  of SNF expenditure data on Nursing Home Compare nor begun  systematically evaluating how to publicly report expenditure measures.  The officials explained that the agency is currently focused on  implementing an electronic system for collecting SNF direct care staffing  data (known as the Payroll-Based Journal) and making changes to  existing measures in Nursing Home Compare this year. In March 2016,  CMS released a public data set on its website that contains information  on utilization, payments, and submitted charges for services SNFs  provided to Medicare beneficiaries in 2013. Upon releasing the data set,  CMS officials stated they were committed to greater data transparency.
In making data accessible to public stakeholders, federal internal control  standards related to external communication suggest that agencies  consider the audience, nature of information, availability, cost, and legal  or regulatory requirements to ensure that information is communicated in  a quality manner. Until CMS takes steps to make SNF expenditure data  easier to use and locate, public stakeholders will have difficulty accessing  the only publicly available source of financial data for many SNFs.
section_title: CMS Does Not Adequately Ensure the Reliability of SNF Expenditure Data
paragraphs: Despite CMS’s statement that it has made a reasonable effort to ensure  the accuracy of SNF cost report data, we found that the agency performs  minimal quality control of the SNF expenditure data in the Medicare cost  reports to ensure data reliability. Instead, CMS largely relies on SNFs to  validate their own data. CMS requires SNFs to self-certify to the accuracy  and completeness of their cost report data. However, according to CMS  officials and one researcher we interviewed, there is little incentive for  SNFs to ensure the accuracy and completeness of their data because the  data do not affect the amount of Medicare payments each SNF receives.  However, CMS does use the cost report data to update overall SNF  payment rates. Despite this, CMS officials told us the agency conducts  “extremely limited” reviews of cost report data because of funding and  resource constraints. The officials said they rarely adjust SNFs’ reported  costs and focus instead on improper payment reviews. For these  reasons, CMS officials and the two researchers we interviewed told us  they could not place full confidence in the reliability of the SNF  expenditure data in the cost reports.
Federal internal control standards require agencies to use quality  information. The standards highlight the importance of processing  obtained data into quality information, central to which is its accessibility  and reliability. Reliable information that is accurate and complete can help  agencies evaluate performance, make informed decisions, address risks,  and achieve key objectives. Until CMS takes steps to ensure the  accuracy and completeness of the SNF expenditure data, the data’s  reliability cannot be ensured.
section_title: For-Profit SNFs Generally Had Lower Direct and Indirect Care Costs as a Percentage of Revenue and Higher Margins than Did Nonprofit and Government SNFs
paragraphs: Our analysis found that, for each fiscal year from 2011 through 2014,  direct and indirect care costs were lower as a percentage of revenue, on  average, at for-profit SNFs compared with nonprofit and government  SNFs. Costs were similarly lower at chain SNFs compared with  independent SNFs. Over the 4-year period we examined, the  percentage of revenue spent on direct and indirect care remained  relatively constant, on average, at for-profit and nonprofit SNFs but  decreased at government SNFs. For both chain and independent SNFs,  the percentage of revenue spent on direct and indirect care remained  relatively constant, on average, from fiscal years 2011 through 2014.  (See fig. 1.)
For for-profit and nonprofit SNFs, both overall costs and total revenues  increased, on average, in each of the 4 years we examined. For example,  for-profit and nonprofit SNFs generally had small annual increases in their  direct care costs. However, because their revenue also increased slightly  each year, on average, their direct care costs remained relatively  constant as a percentage of revenue. Both overall costs and direct care  costs decreased, on average, at government SNFs in each fiscal year  from 2011 through 2014. Total revenues also decreased, on average, at  government SNFs between fiscal years 2011 and 2014.
Regardless of ownership type and chain affiliation, SNFs’ costs for  capital-related assets and administrative services accounted for a similar  percentage of revenue, on average, during each fiscal year from 2011  through 2014. According to the cost report data, capital-related asset  costs accounted for 4 percent to 7 percent of revenue, on average, at for- profit, nonprofit, and government SNFs in each year. Similarly, costs for  capital-related assets at chain and independent SNFs generally  accounted for 5 percent to 6 percent of revenue, on average, in each  year. During these 4 years, costs for administrative services accounted  for 8 percent to 9 percent of revenue, on average, regardless of  ownership type and chain affiliation.
In addition, median margins were higher for for-profit and chain SNFs  than for other SNFs. As a group, for-profit SNFs had a higher median  margin (between 16 percent and 19 percent) than nonprofit and  government SNFs (between 12 percent and 15 percent and between 3  percent and 13 percent, respectively) for each fiscal year between 2011  and 2014. Similarly, median margins were generally higher at chain SNFs  (between 16 percent and 19 percent) than at independent SNFs (between  12 percent and 17 percent) in each year. All SNF organization types had  positive median all-payer margins each year, meaning that their  payments more than covered their costs.
Moreover, from fiscal years 2011 through 2014, median margins  increased regardless of ownership type and chain affiliation, but the  amount of the increase differed between organization types. The median  margin increased more at government SNFs than at for-profit and  nonprofit SNFs and more at independent SNFs than at chain SNFs.  During the 4-year period, the median margin at government SNFs  increased 10 percentage points (from 3 percent to 13 percent), while it  increased 3 percentage points at for-profit SNFs (from 16 percent to 19  percent) and at nonprofit SNFs (from 12 percent to 15 percent). In  addition, independent SNFs’ median margin increased by 5 percentage  points (from 12 percent to 17 percent) and chain SNFs’ median margin  increased by 3 percentage points (from 16 percent to 19 percent). (See  fig. 2.)
section_title: For-Profit SNFs Had Lower Nurse Staffing Levels Than Other SNFs, and Nurse Staffing Levels Estimated to Decline Slightly as Margins Increase
paragraphs: SNFs’ nursing staff levels, as measured by nurse time per resident day,  were relatively stable for fiscal years 2012 through 2014, but there was  some variation by type of ownership. For-profit SNFs generally had less  nursing time per resident day in each of the 3 years we examined. After  our adjustment for resident case-mix, we continued to observe the same  trends. These trends were generally consistent with the small annual  increases in direct care costs we observed at for-profit and nonprofit  SNFs during this period. Table 1 shows SNFs’ reported (unadjusted) and  adjusted total nurse and RN time per resident day.
Examining each fiscal year separately, we estimated that a SNF’s margin  generally had a small, but statistically significant, effect on its nursing time  per resident day. After controlling for other factors, we estimated that a  SNF’s case-mix adjusted total nurse and RN time per resident day  (reflecting the time nurses spend on both direct patient care and  administrative duties) decreased slightly as its margin increased. For  fiscal year 2012, we estimated that if a SNF with a margin of 20 percent  and a case-mix adjusted total nurse time of 4 hours per resident day  increased its margin to 21 percent, its total nurse time would fall to 3  hours and 51.9 minutes per resident day (a decrease of 8.1 minutes). For  the same year, we estimated that a SNF’s case-mix adjusted RN time per  resident day decreased by 0.6 minutes for each percentage point  increase in its margin. Similarly, for fiscal year 2013, we estimated that a  1 percentage point increase in a SNF’s margin decreased its case-mix  adjusted total nurse time per resident day by 5.1 minutes and its case-mix  adjusted RN time per resident day by 0.4 minutes. Finally, for fiscal year  2014, we estimated that a SNF’s case-mix adjusted total nurse time per  resident day decreased by 7.4 minutes and its case-mix adjusted RN time  per resident day decreased by 0.2 minutes for each percentage point  increase in its margin.
In each of the 3 fiscal years, which we examined separately, the  relationship between SNF nursing time and margins varied by ownership  type. Table 2 shows our estimates for the change in a SNF’s case-mix  adjusted total nurse and RN time per resident day for each percentage  point increase in its margin. For example, for fiscal year 2012, we  estimated that if a for-profit SNF with a margin of 20 percent and a case- mix adjusted total nurse time of 4 hours per resident day increased its  margin to 21 percent, holding all other variables constant, its total nurse  time would fall to 3 hours and 49 minutes per resident day (a decrease of  11.0 minutes).
The relationship between a SNF’s total nurse time per resident day and  its margin also differed slightly by chain affiliation. We estimated that the  total nurse time per resident day decreased slightly more at SNFs that  were part of chains than at those that were independent. For example, we  estimated that for each percentage point increase in a SNF’s margin, the  case-mix adjusted total nurse time per resident day decreased by 6.9  minutes at chain-affiliated SNFs and by 4.3 minutes at independent SNFs  in fiscal year 2014. For each of the 3 years we examined, a chain- affiliated SNF’s margin did not have a statistically significant effect on its  RN time per resident day.
Although the effect of margins in our regression analyses was statistically  significant, margins were not the strongest predictor of case-mix adjusted  total nurse and RN time per resident day. Accounting for the state where  each SNF was located was very important in explaining its nursing time.  This could be attributable to variation across states in staffing  requirements, Medicaid reimbursement rates, or other factors. Because of  the strong effect of the state where each SNF was located, we needed to  statistically control for a SNF’s state to isolate the effects of a SNF’s total  nurse and RN time per resident day on its margin. In addition, we  estimated that a SNF’s proportion of Medicare days increased its total  nurse and RN time per resident day. See appendix I for additional detail  on the methods and results of our expenditure analyses.
section_title: Conclusions
paragraphs: The collection of SNF expenditure data gives CMS the opportunity to  provide information to the public on SNFs’ relative expenditures. Data that  are readily accessible to the public and validated for completeness and  accuracy to ensure reliability can contribute to SNF data transparency.  However, public stakeholders have experienced difficulty accessing the  data—including locating and using the data—and CMS efforts to ensure  data accessibility and reliability have been limited.
section_title: Recommendations for Executive Action
paragraphs: To improve the accessibility and reliability of SNF expenditure data, we  recommend the Acting Administrator of CMS take the following two  actions:  1.  Take steps to improve the accessibility of SNF expenditure data,  making it easier for public stakeholders to locate and use the data.  2.  Take steps to ensure the accuracy and completeness of SNF  expenditure data.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to HHS for comment. In its written  comments, HHS concurred with our recommendation to improve the  accessibility of SNF expenditure data. HHS disagreed with our  recommendation that it take steps to ensure the accuracy and  completeness of the SNF expenditure data. HHS said that it has made a  reasonable effort to ensure the accuracy of the expenditure data, that the  data are used for general purposes, and that the amount of time and  resources that may be required to verify the accuracy and completeness  of the data could be substantial and might not create significant benefit to  the agency or the public. However, during the course of our work, CMS  told us that the agency conducts only “extremely limited” reviews of the  expenditure data due to resource constraints. Moreover, we found that  CMS uses the expenditure data to update overall SNF payment rates, in  addition to more general purposes. Therefore, we continue to believe that  CMS should take steps to ensure reliable expenditure data that are  accurate and complete. HHS’s comments on a draft of this report are  reproduced in appendix II.
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If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.
section_title: Appendix I: Additional Detail on the Methods and Results of Our Expenditure Analyses
paragraphs: This appendix describes our methodology for examining (1) how skilled  nursing facility (SNF) costs and margins vary by facility characteristics  and (2) how SNF nurse staffing levels vary by facility characteristics and  the relationship between SNF nurse staffing levels and margins. The  appendix also provides further details of the results of our analyses.
subsections: section_title: Examining SNF Costs and Margins by Facility Characteristics
paragraphs: To examine how SNF costs and margins vary by facility characteristics,  we developed cost categories, calculated the total costs for each category  as a percentage of revenue, and made comparisons across SNF groups.  We organized each SNF’s costs into four categories: direct care, indirect  care, capital-related assets, and administrative services. Officials from the  Centers for Medicare & Medicaid Services (CMS) said the categories we  used included the appropriate expenses listed on the cost reports. Table  3 provides a crosswalk between the cost categories we used and the cost  centers from the cost report.
We then calculated each SNF’s costs as a percentage of revenue. We  also computed each SNF’s margin, reflecting the percentage of revenue  each SNF retained. While SNFs may be part of larger nursing homes that  operate multiple lines of business (such as hospices, ancillary services,  and home health care services), we focused our analyses on the SNF line  of business. We compared SNF costs and margins by ownership type  and chain affiliation.
section_title: Examining How SNF Nurse Staffing Levels Vary by Facility Characteristics and the Relationship between SNF Nurse Staffing Levels and Margins
paragraphs: To examine how SNF nurse staffing levels vary by facility characteristics  and the relationship between SNF nurse staffing levels and margins, we  performed statistical analyses to identify factors associated with each  SNF’s total nurse and registered nurse (RN) staffing levels. To measure  nurse staffing levels, we calculated each SNF’s total nurse and RN time  per resident day. A SNF’s total nurse time per resident day reflects the  number of hours that RNs, licensed practical nurses (LPN), and certified  nursing assistants (CNA) worked per resident day. We computed each  SNF’s total nurse and RN time per resident day using a complex formula.  We first calculated a SNF’s total paid hours for full-time and part-time  RNs, LPNs, and CNAs who are both directly hired and under contract.  Because the time needed for treating residents varies with their clinical  conditions and treatments, we then adjusted each SNF’s nursing time per  resident day on the basis of its Medicare residents’ health care needs.  This process is known as case-mix adjustment. We developed our  formula based largely on CMS’s methodology for case-mix adjusting  nurse staffing measures for Nursing Home Compare, the CMS website  that contains summary measures of SNF quality data. CMS’s approach  is based on the distribution of a SNF’s residents’ assignments into one of  53 different payment groups, called resource utilization groups. Each  group describes residents with similar therapy, nursing, and special care  needs. CMS’s model uses the estimated RN, LPN, and CNA minutes for  each resource utilization group based on the results from the Staff Time  Measurement Studies conducted in 1995 and 1997.
For our analyses, we used a different source of data than what CMS uses  for Nursing Home Compare. CMS obtains staffing data from Form CMS- 671 (Long Term Care Facility Application for Medicare and Medicaid)  from the Certification and Survey Provider Enhanced Reports (CASPER)  system and census data from Form CMS-672 (Resident Census and  Conditions of Residents). CMS officials advised us against using the  CASPER data. CMS has observed that the CASPER data, which are  collected over a 2-week period at the time of a SNF’s annual inspection  survey, generally indicate higher RN staffing levels and lower LPN and  CNA staffing levels compared with the Medicare cost reports. Table 4  shows CMS’s analysis of the staffing levels using 2013 data from the  Medicare cost reports and CASPER.
Because of the available data in the cost reports, there were some  limitations with our case-mix adjustment calculation. While the cost  reports include data on the resource needs for Medicare residents, they  do not capture data on the resource needs for non-Medicare residents.  Accordingly, we estimated a SNF’s resident case-mix based only on its  Medicare residents’ resource utilization groups. In addition, the cost  reports obtain data on 13 additional resource utilization groups that CMS  implemented in 2010 to reflect updated staff time measurement data. For  our calculation, we could not use Medicare days attributable to these  groups on the cost reports. Finally, because SNFs’ staffing data on the  cost reports were incomplete for fiscal year 2011 and were generally  unavailable beyond fiscal year 2014 when we began our analyses, we  limited our analyses to fiscal years 2012 through 2014.
HoursAdjusted is the case-mix adjusted total nurse or RN hours per  resident day.
HoursReported is each SNF’s number of reported total nurse or RN  hours per resident day.
HoursExpected is each SNF’s number of expected total nurse or RN  hours per resident day.
HoursNational Average is the national average of reported total nurse or RN  hours per resident day.
We then used multiple linear regression analysis, a statistical procedure  that allowed us to assess the relationship between a SNF’s margin and its  case-mix adjusted total nurse and RN time per resident day, controlling  for other factors. The other factors in our models included a SNF’s  average hourly RN wage, average resident length of stay, chain affiliation,  number of beds, number of competitors within 15 miles, ownership type,  proportion of Medicare days, and urban or rural status. Our models also  accounted for the state where each SNF was located. We performed  separate regressions for all SNFs in fiscal years 2012, 2013, and 2014.  We also performed regressions by ownership type and chain affiliation.
Table 5 shows the results of our regressions for all SNFs where the  dependent variable is the case-mix adjusted total nursing hours per  resident day, and table 6 shows the results of our regressions for all  SNFs where the dependent variable is the case-mix adjusted RN hours  per resident day. The tables include regression coefficients and R2  statistics. Regression coefficients can be interpreted as the predicted  change in nursing time per resident day for every unit change in the  independent variable. In general, it is not meaningful to compare the size  of these coefficients because our independent variables are on different  scales. We used R statistics to estimate how much of the variation in the  nursing time per resident day can be explained by all the independent  variables in our models. Taken together, the independent variables  explained between 27 percent and 31 percent of the variation in the case- mix adjusted total nursing hours per resident day and between 36 percent  and 39 percent of the variation in the case-mix adjusted RN hours per  resident day for fiscal years 2012 through 2014. Accounting for the state  where each SNF was located was very important in explaining its nursing  time per resident day. This could be attributable to variation across states  in staffing requirements, Medicaid reimbursement rates, or other factors.
section_title: Appendix II: Comments from the Department of Health and Human Services
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Martin T. Gahart, Assistant  Director; David Grossman, Analyst-in-Charge; Todd D. Anderson; and  Jane Eyre made key contributions to this report. Also contributing were  Elizabeth T. Morrison, Vikki Porter, Eric Wedum, and Jennifer Whitworth.