The Gerontologist Copyright 2003 by The Gerontological Society of America
Vol. 43, Special Issue II, 47–57
Designing a Report Card for Nursing Facilities:
What Information Is Needed and Why
Charlene Harrington, PhD,1
Janis O’Meara, MPA,1
Martin Kitchener, PhD,1
Lisa Payne Simon, MPH,2
and John F. Schnelle, PhD3
Purpose: This article presents a rationale and con-
ceptual framework for making comprehensive con-
sumer information about nursing facilities available.
Such information can meet the needs of various
stakeholder groups, including consumers, family/
friends, health professionals, providers, advocates,
ombudsman, payers, and policy makers. Design
and Methods: The rationale and framework are
based on a research literature review of key quality
indicators for nursing facilities. Results: The ﬁnd-
ings show six key areas for information: (a) facility
characteristics and ownership; (b) resident character-
istics; (c) stafﬁng indicators; (d) clinical quality
indicators; (e) deﬁciencies, complaints, and enforce-
ment actions; and (f) ﬁnancial indicators. This infor-
mation can assist in selecting, monitoring, and
contracting with nursing facilities. Implications:
Model information systems can be designed using
existing public information, but the information needs
to be enhanced with improved data.
A number of reports have documented the serious
quality problems in the U.S. health care system
(Chassin & Galvin, 1998; Schuster, McGlynn, &
Brook, 1998). The President’s Advisory Commission
(1998) called for a national commitment to health
care quality, and Congress responded by passing
legislation requiring annual reports on the trends in
the quality of health care (U.S. Congress, 1999).
Three Institute of Medicine (IOM) (2001a, 2001b,
2001c) studies have recommended developing
national health care quality reports to inform the
nation about speciﬁc improvement efforts.
Grading health care providers using report cards
is one way to highlight differences in quality of care.
Although report cards on performance have been
used for hospitals, health plans, and physician
groups (Simon & Monroe, 2001), information about
nursing facility (NF; homes) quality is only now
being developed by the Centers for Medicare and
Medicaid Services (CMS) and some states. Older
consumers want greater empowerment to make
decisions about long-term care, but they need better
consumer information, more options, and effective
advocacy (Kane & Kane, 2001). NF report cards can
provide consumers and others with valuable, com-
This article has three objectives: (a) to present
a rationale for making consumer information about
NFs available; (b) to provide a conceptual frame-
work for reporting measures of structure, process,
and outcomes on NF report cards; and (c) to propose
six key elements for an information system that
builds on recent federal efforts to provide nursing
home information on the Internet. The authors’
framework is designed to be comprehensive to meet
the information needs of various stakeholder groups.
It is hoped that making data available on NF quality
may expose quality problems and encourage NFs to
compete on the basis of quality.
The Need for NF Report Cards
The nation’s 1.6 million NF residents are one of
its most vulnerable groups. Many NF residents suffer
from multiple chronic illnesses, and most are unable
to feed, bathe, dress, transfer, and toilet without
moderate or extensive assistance. Eighty-three per-
cent of NF residents need assistance with
3 to 6 basic activities of daily living (IOM, 2001d,
p. 39). The average age of NF residents is 85, and the
majority are women (74%). Many NF residents are
cognitively impaired (47.2% have dementia; Krauss
et al., 1997). Only 17% of residents have a spouse,
and some have no children, family, or friends (IOM,
This article was prepared for the California Health Care Foundation
no. 99-504. The views expressed in this paper are those of the authors
and may not reﬂect those of the Foundation.
Address correspondence to Charlene Harrington, PhD, Department
of Social and Behavioral Sciences, University of California, San
Francisco, 3333 California Street, Suite 455, San Francisco, CA 94118.
Department of Social and Behavioral Sciences, University of
California, San Francisco.
California HealthCare Foundation, Oakland, CA.
Borun Center for Gerontology Research, University of California,
Vol. 43, Special Issue II, 2003 47
2001d, p. 39). Most are poor (about 68%) and have
their care paid for by Medicaid (Harrington,
Carrillo, Thollaug, & Summers, 2000a). Because of
the vulnerability of NF residents, deciding which NF
to enter and monitoring the ongoing NF quality for
residents are extremely important.
Although some NFs offer good care, the poor
quality of care provided in many NFs has been
documented over the past 30 years (IOM, 1986; U.S.
General Accounting Ofﬁce [GAO], Vladeck, 1980).
GAO (1999a), the Ofﬁce of the Inspector General
(OIG; 1999), and CMS, (U.S. Health Care Financing
Administration [HCFA], 1998) have documented
widespread NF quality problems. Some of the
quality problems have worsened over the past 8
years, and there is wide variation in enforcement of
federal standards across the states (GAO, 1999a;
Harrington et al., 2000a; IOM, 2001d; U.S. Senate
Special Committee on Aging, 1999). Although the
quality in some facilities is poor, some facilities
provide good care (IOM, 2001d). Developing
a system for making information about NF quality
available on the Internet will make the public more
aware of the variations in quality.
How Can Information About NFs Be Used by
NF information can be used by different stake-
holders for a variety of reasons. First, it can help
consumers and their family and friends select
a facility. Hospital and subacute discharge planners,
physicians, nurses, social workers, and advocates
can use the information to assist individuals and
their families in planning and placement decisions.
The choice of a facility, however, may be con-
strained by the location in which relatives and
friends live, bed availability, the payer type, and
other market and informational factors (Mukamel
& Spector, 2002). Selection decisions are often made
at a crisis point in a short time period when a hospital
patient needs to be moved to another location. This
situation can limit choices and options.
Second, families, friends, ombudsmen, consumer
advocates, health professionals, provider associa-
tions, unions, researchers, and the press can use
information to monitor NF quality of care. Moni-
toring facilities for quality of care can be especially
important for long-stay residents who may have had
limited choices in the selection of a facility. The
information about quality problems can be used by
family and friends in discussions with the facility
administration and staff, which could result in
quality improvements. At the same time, positive
ﬁndings about quality could reassure family and
friends and reinforce providers about the quality of
care they offer. Administrators, facility staff, and
provider associations can use quality information to
evaluate and compare facility performance and
identify areas for quality improvement initiatives.
Third, the information can be used by organiza-
tions that purchase NF care for their members to
help them decide whether or not they want to pay
for care at a speciﬁc facility or determine whether
they are getting value for their payments. Payers who
contract for services from NFs include government
ofﬁcials (e.g., the Veteran’s Administration), private
health insurance companies, and health maintenance
organizations. The information on NF report cards
may also prove useful to other organizations,
including public and private lenders, investors, risk
management companies, and NF insurers in making
investment and insurance decisions.
Finally, the information should be useful to public
policy makers. For example, if a state has established
certain requirements, such as minimum stafﬁng level
for facilities, the report card can show which
facilities are in compliance with their requirements.
The report card could identify other problems, such
as high staff turnover rates that policy makers may
want to address with legislation or regulation.
Ultimately, report cards cannot serve the interests
of all users equally. The most important user of
quality information should be considered the poten-
tial nursing home resident and his/her family and
friends. This means that the type of information and
its presentation needs to be tailored primarily for
consumers, but having comprehensive information
available on NFs can also serve other potential users
(Mukamel & Spector, 2002). The downside of
having a comprehensive system is that the informa-
tion may be too complex and detailed for the typical
consumer. This points to the need to pay particular
attention to presenting data in a way that is easily
understood, with simple summaries and visual cues
(Hibbard, Slovic, Peters, & Finucane, 2002).
Report cards on NFs should be put on the Internet
to facilitate easy access to information. The number
of Americans who are likely to use the Internet to
ﬁnd aging-related health care information is rapidly
growing with the aging of the population, who are
expected to increase from 34.8 million age 65 and
older in 2000 to 70.3 million by 2030 (Wetle, 2002).
As the older population grows, the number of older
Internet users will increase. In 2001, 4.2 million
Americans age 65 and over were estimated to use the
Internet at home (Administration on Aging, 2002).
Others may access the Internet at libraries, senior
citizens centers, and the homes of family members and
friends. In general, older people have more chronic
conditions and disabilities and are more interested
in learning about health care and the health care
system than people in other age groups (Wetle, 2002).
Federal and State Efforts to Provide Consumer
Information on NFs
In 1999, CMS created an Internet-based NF
information system that is part of the Medicare
website called www.Medicare.gov/NHCompare/
48 The Gerontologist
(see the President’s announcement in U.S. Depart-
ment of Health and Human Services, 1998). Using
administrative data primarily from the Online
Survey Certiﬁcation and Reporting (OSCAR) sys-
tem, it provides comparison data for all 16,500 NFs
in the United States that are certiﬁed to provide
Medicare and Medicaid services. It was the ﬁrst
major federal effort to inform the public about NFs
and includes basic information about facilities (e.g.,
location, bed size, occupancy), residents (e.g.,
percentage with pressure sores and other condi-
tions), stafﬁng, and deﬁciencies. The information is
obviously in demand, because the website receives
approximately 100,000 visits a month (U.S. House
of Representatives, Committee on Government Re-
The NHCompare website is continuing to be
developed by CMS. A recent report by the U.S.
House of Representatives (2002) concluded that the
CMS website was misleading consumers because it
did not report ﬁndings from complaint investiga-
tions. In response, CMS added the complaint
information to the website in the spring of 2002.
CMS has also been developing a set of clinical
quality indicators (QIs) for the website using advice
from the National Quality Forum’s consensus
committee established to make recommendations to
CMS on quality indicator reports. In the spring of
2002, CMS began testing QIs on the website in six
pilot states (Florida, Colorado, Maryland, Ohio,
Rhode Island, and Washington; see NHCompare
website; see later discussion; Morris et al., 2002).
CMS reported on QIs in all states in the fall of 2002.
Many improvements have been made in the CMS
NHCompare website, but it could be improved by
rating facilities, interpreting the information, and
guiding consumers in selecting and comparing
There is a signiﬁcant amount of interest in
providing information about NF care to the public
via the Internet. A recent Internet survey found that
25 states have developed their own NF websites
(Harrington et al., 2002). These websites vary in the
type and amount of information they provide; some
states provide information similar to the Medicare
NHCompare website, whereas others go beyond it in
providing additional state-speciﬁc information. A
number of consumer advocacy groups and private
commercial sites have created websites as well. The
California HealthCare Foundation developed a com-
prehensive website for California, launched in the
fall of 2002 (www.calnhs.org).
Conceptual Model for a Consumer Information
System for NFs
Although it is not difﬁcult to demonstrate the
need for consumer information, it is more compli-
cated to develop a model of quality that should be
included in such a system. Quality can be considered
from Donabedian’s (1980) multidimensional frame-
work that developed structural, process, and out-
come measures. Structural measures are those that
describe the characteristics of facilities, such as size,
proﬁt status, and stafﬁng levels. These measures are
the most commonly used because they are generally
more available and easier to measure than process
and outcomes variables, but they are also less direct
measures of quality (Ramsay, Sainfort, & Zimmer-
man, 1995). Process measures are those that describe
the process of care provided. These measures include
nursing care procedures, such as those to prevent
pressure ulcers and weight loss. The outcome mea-
sures are the most difﬁcult to measure because they
focus on the results of care. This is especially difﬁcult
with NF residents who may be in declining health.
Using this framework, we have developed a com-
prehensive model for a consumer information system
that includes structure, process, and outcomes mea-
sures. The structural measures include: (1) facility
characteristics and ownership; (2) resident character-
istics; (3) stafﬁng indicators; and (4) ﬁnancial in-
dicators. The process and outcome measures include:
(1) deﬁciencies, complaints, and enforcement actions;
and (2) clinical QIs. The state survey agencies eval-
uate the process and outcomes of NF care and may
issue deﬁciencies and take enforcement actions
where standards are not met. CMS developed 24
clinical QIs to measure both process and outcomes
of care at the resident level (Ramsey et al., 1995;
Zimmerman et al., 1995). New QIs have been devel-
oped, along with a subset of the original QIs to
measure outcomes of NF care (Morris et al., 2002).
Some QI measures are targeted on short-term
postacute residents, whereas others are more appro-
priate for long-stay residents. All of these measures
can be useful for reporting quality to consumers.
The structural measures may be associated with
process and outcome measures, but they are not
direct measures of quality. Although the process and
outcome measures may be more important than the
structural measures, they are presented in the order
shown because consumers are more accustomed to
considering the basic characteristics of facilities
rather than the process and outcomes of quality.
The rationale and elements of each of the compo-
Structural Measures of Quality
Facility Characteristics and Ownership
Facility characteristics show whether an NF meets
an individual’s needs and preferences, and they can
be associated with quality of care and quality of life
in facilities. These characteristics are correlates of
quality, but may not necessarily be determinants of
quality, and quality can vary widely within the
Vol. 43, Special Issue II, 2003 49
Location.—Historically, consumer selection of an
NF has been primarily based on geographic location,
that is whether the facility was located near an
individual’s home or the home of relatives or friends.
Nurse stafﬁng levels, the percentage of residents with
negative outcomes, and deﬁciencies vary by geo-
graphical areas (Harrington & Carrillo, 1999;
Harrington, Carrillo, Mullan, & Swan, 1998,
2000a; Zinn, 1993b, 1994). Although quality varies
by location, the speciﬁc relationships between
location and quality need more research.
Type of Facility and Services.—Skilled nursing
facilities (SNFs) provide intensive 24-hour nursing
care and primarily serve Medicare residents. NFs or
combination SNFs and NFs, certiﬁed for Medicare
and Medicaid, also offer 24-hour nursing services
that are usually less intensive than SNFs. Consumers
need to know whether or not a facility is certiﬁed for
Medicare and/or Medicaid if they intend to have
care paid for by one or both programs, either
initially or later as private resources are exhausted.
Facilities may offer special services, such as in-
termediate care, psychiatric services, subacute care,
or hospice care. The type of facility and services
provided should match the needs of the resident.
Size.—There are relationships between facility
size and quality, but the ﬁndings from various
studies are mixed. Large facilities have been found to
have more deﬁciencies (Harrington et al., 2000b),
more restraint deﬁciencies (Castle, 2000, 2001), and
poorer outcomes (such as higher pressure sore rates
and restraint use; Zinn, Aaronson, & Rosko, 1993c;
Zinn, 1994) than small facilities, perhaps because
large facilities may be more difﬁcult to manage. On
the other hand, better outcomes on mental status
measures were found in large facilities (Porell, Caro,
Silva, & Monane, 1998). Size can also be a matter of
preference; large facilities may have an institutional
feel, whereas small facilities may offer more personal
attention. Large facilities may have better-trained
staff and offer more amenities than small facilities.
Organizational structure, management factors, staff
training, and amenities are probably more important
than size, but information on these factors is not
readily available from public information sources.
Occupancy Rates.—Although NF options may
be limited in some areas, many regions have facilities
with low occupancy rates, giving consumers a choice
among facilities (Harrington et al., 2000a). Occu-
pancy rates may help predict whether or not a facility
will have a waiting list, but the implications for
quality are mixed. Castle (2001) showed higher use
of restraints, more pressure sores, and greater use of
psychoactive drugs in facilities with higher occu-
pancy rates. Facilities with lower occupancy rates
are associated with higher mortality rates (Zinn et al.,
1993c), higher nurse stafﬁng levels, less restraint use,
and fewer residents that are not toileted (Zinn,
1993a, 1994). Low occupancy rates could also be
a reﬂection of poor quality rather than the cause of
poor care. Cost studies show a strong negative
relationship between occupancy and average facility
costs and ﬁnancial problems (Bishop, 1980; Kitch-
ener, Bostrom, & Harrington, 2002a; Ullmann, 1984).
Hospital-Based.—Nationwide, about 10% of NFs
are owned or operated by hospitals (Harrington et al.,
2000a). In general, hospital-based facilities pro-
vide care for Medicare and short-term postacute care
residents, and they have been shown to have higher
stafﬁng levels (Cohen & Spector, 1996) than free-
standing facilities that often focus on long-stay
residents. The quality of the stafﬁng data from
hospital-based facilities, however, may be more
problematic than from free-standing facilities. Hos-
pital-based facilities may also be more likely to use
restraints and receive restraint deﬁciencies than free-
standing facilities (Castle, 2000).
Ownership Type.—Owners make decisions about
how the facility is run and resources used. Sixty-
seven percent of the nation’s NFs are investor-owned
(Harrington, Woolhandler, Mullan, Carrillo, &
Himmelstein, 2001), creating an incentive to maxi-
mize net revenues. Nonproﬁt NFs are associated
with higher stafﬁng levels, better quality of services
(Aaronson, Zinn, & Rosko, 1994; Harrington et al.,
2001; Harrington, Zimmerman, Karon, Robinson, &
Beutel, 2000c), and a lower probability of death and
infection than for-proﬁt NFs (Spector, Seldon, &
Cohen, 1998). For-proﬁt facilities have higher
percentages of residents that are restrained, cathe-
terized, and not toileted, and lower numbers of
registered nurses (RNs) per resident than nonproﬁts
(Zinn, 1993a, 1994; Zinn et al., 1993c). Because
quality can vary by ownership, however, the type of
owner is best considered in combination with QIs.
Owner Name and Stability.—Some owners may
have a history of quality problems in their facilities,
so that consumers may want to avoid facilities with
problematic owners (Cabrera & Hefner, 1997;
Kitchener et al., 2002a). Therefore, providing con-
sumers with the names of owners is important.
Ownership changes can affect the quality of care
either positively or negatively. A facility with stable
ownership may indicate that it has been successful in
its operation over time, whereas a history of frequent
ownership changes may reﬂect quality or ﬁnancial
problems (Kitchener et al., 2002a; Kitchener, O’Neill,
& Harrington, 2002b). These data are available from
the federal OSCAR database, but are not on the
CMS Medicare website.
50 The Gerontologist
Multifacility Chain.—Ownership information
should also include whether the NF is part of
a multifacility chain organization, deﬁned by CMS
as two or more facilities owned by one company.
Fifty-two percent of the nation’s NFs are part of
a multifacility chain (Harrington et al., 2000a). Some
chains are small and may be owned by a few
individuals, whereas others are large and operate in
multiple states and internationally (Harrington,
2001). The largest nine chains operate 17% of U.S.
nursing home beds (American Health Care Associ-
ation [AHCA], 1999; Kitchener et al., 2002a). In
these and other cases, management decisions may be
made at a distant corporate headquarters rather than
at the facility level. Because quality varies within and
across chains and nonchains, chain ownership
should be considered in combination with other
indicators of quality.
NF residents have different needs that require
various levels of care. The characteristics of residents
help create the environment of a facility, and they
affect resource needs but they would not necessarily
impact on the quality of care in facilities. Data on
resident characteristics are available for all NFs, but
have not been placed on the CMS Medicare
factors—including age, sex, and ethnicity—may be
associated with consumer preferences in facility
selection. Higher percentages of the aged 85 and
over population in a facility may increase the
dependency (case-mix) of residents and the per-
patient cost of care (Ullmann, 1990).
Length of Residency.—The length of residency is
the average amount of time that residents stay at an
NF. The majority of NF residents stay for less than
3 months, but many stay for a long period of time. If
a long stay is expected, a resident may wish to
choose an NF that has a higher percentage of long-
term residents than other facilities.
Resident Dependency Levels (Case-Mix).—Con-
sumers should have access to information about the
dependency levels of NF residents. Resident care
needs are determined by resident assessment data
collected by each facility. NFs must complete a full
assessment and develop a care plan for each resident,
using the CMS Minimum Data Set (MDS) form
within 14 days of admission (5 days for Medicare
residents), and then a partial MDS must be
completed quarterly. A full assessment is required
annually, when there are signiﬁcant changes in
a resident’s condition. CMS uses the MDS data to
classify residents into Resource Utilization Groups
(RUGs), on the basis of the amount and type of
nursing and therapy staff time needed (Fries et al.,
1994). NF residents are separated into 44 RUG
categories within seven broad groups: (1) rehabilita-
tion; (2) complex care; (3) extensive care; (4) special
nursing care; (5) cognitive problems; (6) behavioral
problems; and (7) physical dependency. Each facility
can be given a summary score (case-mix index) that
indicates the amount and type of care needed. The
percentage of residents in the general RUG catego-
ries can tell consumers what the typical resident
needs are in a facility.
Stafﬁng levels in NFs are a structural measure for
quality of care that may impact the process and
outcomes of quality. Studies consistently show the
positive relationship between higher nurse stafﬁng
levels, especially RNs, and the outcomes of NF care
(Aaronson et al., 1994; Bliesmer, Smayling, Kane &
Shannon, 1998; Castle, 2001; Cherry, 1991; Cohen &
Dubay, 1990; Cohen & Spector, 1996; Harrington
et al., 2000c; IOM, 1996, 2001d; Munroe, 1990;
Spector & Takada, l991; U.S. HCFA, 2000). The
beneﬁts of higher stafﬁng levels can include lower
mortality rates; improved physical functioning; less
antibiotic use; and fewer pressure ulcers, catheter-
ized residents, and urinary tract infections. Inade-
quate stafﬁng and improperly trained staff also
contribute to poor feeding of residents, poor
nutritional intake, undiagnosed dysphagia, bad oral
health, resident deterioration, hospitalization, mal-
nutrition, and dehydration (Kayser-Jones, 1997;
Kayser-Jones & Schell, 1997; Kayser-Jones, Wiener,
& Barbaccia, 1989).
Hours Per Resident Day (hprd).—Typically, nurse
stafﬁng level information is reported as average hprd
(calculated by dividing the total nursing hours
worked by the total resident days of care per year).
Since 1997, the average U.S. NF has provided a total
of 3.5 hprd of RN, licensed vocational nurse (LVN)/
licensed practical nurse, nursing assistant (NA), and
Director of Nursing time (Harrington et al., 2000a).
Of the total time, most (60% or 2.1 hours) is
provided by NAs (with 75 hours of training). On
average, NAs have 12 residents to care for and RNs
and LVNs each must oversee 32 to 34 residents,
although these ratios may vary across shifts and on
weekends and holidays (Harrington et al., 2000a).
Information on stafﬁng is currently available on the
CMS website, but the data need to be improved in
terms of accuracy and frequency of reporting (CMS,
Stafﬁng levels vary widely by facility character-
istics. SNFs that take only Medicare residents have
almost double the stafﬁng of NFs, probably primar-
ily because Medicare pays higher rates than Medic-
Vol. 43, Special Issue II, 2003 51
aid (Harrington et al. 2000a, 2000c). For-proﬁt
facilities generally have lower stafﬁng levels and
more deﬁciencies than nonproﬁts, even though
there can be high variability (Aaronson et al., 1994;
Harrington et al., 2001; Zinn 1993a, 1994; Zinn et al.,
Several reports have shown the need for sub-
stantially higher stafﬁng levels (Harrington et al.,
2000b; HCFA, 2000). A recent CMS (2001) report
found that stafﬁng levels for long-stay residents that
are below 4.1 hprd could result in negative con-
sequences for residents (1.3 hprd for licensed nurses
and 2.8 hprd of NA time). Consumers should be
informed about a facility’s stafﬁng levels, as well as
the actual number and skill mix (i.e., the number of
RNs and LVNs vs. the number of NAs) of nursing
staff. Consumers should be able to compare stafﬁng
levels and stafﬁng mix with other facilities and
against target goals identiﬁed in the CMS (2001)
report. When actual stafﬁng levels were compared
with the target goals recommended by CMS, 97% of
all facilities were found to be operating below the
desired level in 2001 (CMS, 2001).
Case-Mix Adjustment for Dependency Levels.—It
is important to take into account the care needs of
residents (case-mix) when considering whether
stafﬁng levels are adequate (Fries et al., 1994). A
number of studies of NFs have shown a strong
positive relationship between resident case-mix,
nurse stafﬁng time, and cost (Cohen & Dubay,
1990; Fries et al., 1994; Ullmann, 1990). A simulation
model created by Schnelle found that NA time
should range from 2.8 to 3.2 hprd, depending on
the resident care needs (CMS, 2001). If case-mix
adjustments for NA time were added to the target
goal of 4.1 hprd as recommended by Schnelle (CMS,
2001), the stafﬁng would range from 4.1 to 4.5 hprd.
Stafﬁng levels on report cards can be case-mix
adjusted to indicate whether each facility is ade-
Turnover Rates.—Turnover rates of staff can
affect quality because the rates determine continuity
and stability of care. Nurse turnover rates in NFs are
high (51%–93% in 1997; AHCA, 1999; IOM, 2001d),
and nurse shortages are found across the nation
(AHCA, 2001; CMS, 2001). High turnover may
result in poor staff morale and shortages of staff and
poor quality of care (CMS, 2001). Turnover may be
directly related to heavy workloads, low wages and
beneﬁts, poor working conditions, and other factors
(Bowers & Becker, 1992; IOM, 2001d). Frequent
changes in NF management have been shown to
result in a high percentage of pressure ulcers,
catheters, psychoactive drugs, and a large number
of deﬁciencies (Castle, 2001; Singh, Amidon, Shi, &
Samuels, 1996). These data are currently not
collected by CMS, but would be valuable to include
in a report card.
Information about a NF’s ﬁnances can indicate
how management chooses to use resources, and it
can indicate ﬁnancial problems. Although consumers
have not traditionally selected facilities on the basis
of ﬁnancial measures, they are concerned about costs
and payment for services. These types of indicators
may be of particular interest to purchasers of care
and policy makers. The relationships between
ﬁnancial and quality measures have not been
carefully researched, but ﬁnancial indicators can be
an important consideration. Access to ﬁnancial data
is problematic because CMS only has Medicare cost
reports computerized, whereas states have Medicaid
cost reports. CMS does not currently include
ﬁnancial indicators on its website. CMS could collect
ﬁnancial data from Medicare and Medicaid cost
reports for purposes of monitoring the relationship
between quality and ﬁnancial indicators and for
providing ﬁnancial indicators to the public.
Percentage of Medicaid, Medicare, and Private
Pay Residents.—Medicare only pays for short-term
postacute care. Therefore, many residents pay with
personal funds (self-pay) or private insurance. After
personal funds have been exhausted or for those who
are poor, Medicaid becomes the primary payer.
Studies have shown that facilities with higher percen-
tages of Medicaid residents often have quality prob-
lems as reﬂected by more deﬁciencies (Grabowski,
2001; Harrington et al., 2000a, 2000c, 2001; Nyman,
Charges.—Consumers who are going to pay out-
of-pocket want to know what are the private pay
charges for NF care. There is a wide variation in
daily charges for the same kind of care for private
pay and Medicare, with Medicaid generally having
the lowest rates. The negative relationship between
percentage of Medicaid residents and costs per day
can result in facilities discriminating against Medic-
aid residents (Grabowski, 2001; Harrington et al.,
1998; Kanda & Mezey, 1991; Ullmann, 1990).
Higher Medicaid rates have been found to be
associated with higher stafﬁng and quality in
markets without excess demand (Cohen & Spector,
1996; Grabowski, 2001; IOM, 2001d; Mukamel &
Spector, 2002; Nyman, 1987).
Expenses.—The federal and state government
paid for 61% of the $92 billion in NF revenues in
2000 (Levit, Smith, Cowan, Lazenby, & Martin,
2002). Medicare and Medicaid set limits on the total
NF reimbursement rates, which can have an impact
on the services provided (Cohen & Dubay, 1990;
Cohen & Spector, 1996; Swan, Harrington, Studer,
Pickard, & deWit, 2000). NF owners and/or
managers make crucial decisions concerning expen-
ditures that can affect quality of care. The average
52 The Gerontologist
NF across the nation reported spending $36 per
resident day on direct care (nursing care, social and
activity services, and ancillary expenses), or 33.5%
of total expenditures in 1997 (HCIA & Arthur
Andersen, 2000). Facilities spent $16 per resident day
(15% of total expenditures) on indirect costs
(maintenance and housekeeping and dietary and
food expenses) in 1997 (HCIA & Arthur Andersen,
2000). Facilities with higher direct care expenditures
may have better quality because they may have more
staff, less turnover, and better staff morale, than
those that keep direct care expenditures low,
although these relationships have not been exam-
ined. Direct and indirect expenditures vary widely
across NFs within and across states.
Administrative and general costs averaged 26% of
total expenditures in NFs across the nation in 1997
(HCIA & Arthur Andersen, 2000). Paying sufﬁcient
wages and beneﬁts to administrators may help
attract and retain qualiﬁed and motivated individ-
uals who may, for example, have the capacity to
identify and manage ﬁnancial problems. On the
other hand, administration represents an overhead,
which if allowed to become unnecessarily high (e.g.,
Cabrera and Hefner, 1997; Frisman 1999), could
endanger the quality and ﬁnancial position of the
facility. The average cost nationwide for capital
(leases and rentals, and interest and depreciation)
was about 8% of the total expenditures (HCIA &
Arthur Andersen, 2000). High capital costs may arise
when corporations or owners incur debts or expand
their operations (U.S. GAO, 1999b, 2000). Consum-
ers and payers may wish to know whether NFs spend
more or less than average on the different types of
activities and in total than the average facility in
a region (considering the variations in regional cost
Wages and Beneﬁts.—Poor quality of care in
NFs has been associated with low wages and beneﬁts
and high employee turnover rates (Munroe, 1990;
Spector and Takada, 1991). In 1998, the average
median hourly wage for NAs was only $6.58
(AHCA, 1999). Facility wage rates increase costs
(Dor, 1989; Zinn, 1993a, 1993b, 1994), but higher
nurse pay rates may allow facilities to better retain
staff and avoid turnover costs related to recruitment
and training. Many NF employees have limited or no
health beneﬁts, and their wages are substantially
lower than hospital wages. It can be expected that
the higher the beneﬁts, the more likely that employ-
ees will stay in their jobs, and this could mean better
quality of care (IOM, 2001d).
Proﬁts or Losses.—Proﬁtability (the difference
between facility revenues and expenditures; net
income or operating margin) is important to all
facilities (Zeller, Stanko, & Cleverly, 1997). Some
facilities are now primarily reporting their earnings
before interest, taxes, depreciation, amortization,
and rent. If the numbers are positive, the facility
made a proﬁt and it may be ﬁnancially stable. If the
numbers are negative, the facility is operating at
a loss, and it may be ﬁnancially unstable. This could
possibly result in quality-of-care problems. Facilities
with very high proﬁts may be taking proﬁts at the
expense of residents (O’Neill, Harrington, Kitch-
ener, & Saliba, 2002).
Financial Stability.—Individuals may be con-
cerned about living in a facility that is insolvent or
bankrupt (Kitchener et al., 2002b). In 1999 and 2000,
nearly 2,000 of the nation’s NFs were in bankruptcy
because of ﬁlings by some of the largest chains
(Nakhnikian, 2000; Sparks, 1999). Although many of
these chains have now emerged from bankruptcy,
the ﬁnancial stability of NFs is a source of concern to
the public and policy makers (GAO, 1999b, 2000). A
few ﬁnancially unstable facilities have closed sud-
denly, and these highly publicized cases have resulted
in sudden transfers of residents, causing great
distress to residents and their families (Kitchener et
al., 2002a). Although CMS does not collect bank-
ruptcy information, it could be a valuable part of
a consumer information system.
Process and Outcome Measures of Quality
Deﬁciencies, Complaints, and Enforcement Actions
Federal and state standards regarding resident
care and safety must be met to receive a state license
and/or federal certiﬁcation to provide Medicare
and/or Medicaid services. Each state’s licensing and
certiﬁcation agency surveys (inspects) every NF every
12 to 15 months to determine whether minimum
standards are being met (IOM, 2001d). The federal
government has 185 quality standards and a number
of life safety building standards. States often have
their own standards of care and safety that facilities
must meet in addition to the federal standards.
Deﬁciencies.—When a NF does not comply with
either a federal or state standard (regulation), the
facility may be given a deﬁciency by state inspectors.
Surveyors are required to follow established proce-
dures and guidelines to review care and to make
a determination about whether the NF meets the
minimum regulatory standards. Deﬁciencies can be
grouped into eight distinct categories: quality of
care, abuse, resident assessment, resident rights,
environment, nutrition, pharmacy, and administra-
tion (Mullan & Harrington, 2001). Life safety stan-
dards are a separate category. Deﬁciencies indicate
poor quality of care provided by the facility, but the
total number of deﬁciencies may not be as important
as the seriousness of the deﬁciency and whether
a repeated pattern occurs.
Vol. 43, Special Issue II, 2003 53
Scope and Severity.—Federal deﬁciencies are
assigned a rating by surveyors (from A through L)
based on a combination of the scope and severity
of the problem. There are three scope levels: isolated
(a few residents), pattern (more than a few), and
widespread (throughout the facility). The severity is
a measure of the amount of harm that could occur or
has occurred and has four levels: (1) minimal harm
means there was no actual harm, but there is
potential to harm; (2) more than minimal harm
means there was a potential for more than minimal
harm; (3) actual harm to residents; and (4) im-
mediate jeopardy is an immediate threat to resi-
dent health and safety (U.S. HCFA, 1998). These are
included on the Medicare NHCompare website, but
they are not presented in a way that makes them easy
to understand. Some states also have their own
system for identifying and classifying the seriousness
of violations, and these are valuable to consumers
Complaints.—A complaint is a formal grievance
against a facility that may be ﬁled when someone has
an objection to treatment or safety (U.S. HCFA,
1998). Residents, family members, friends, ombuds-
men, health professionals, and other interested
individuals may ﬁle a complaint against an NF.
Complaints may be made directly to the facility, to
the state licensing and certiﬁcation program, or to
the county/state ombudsman program (IOM,
2001d). Complaints can indicate, to some extent,
the degree of consumer dissatisfaction with an NF.
Complaints are generally investigated by a visit from
state surveyors to the facility, and if substantiated,
deﬁciencies may be given for violations of quality
regulations. The number and types of deﬁciencies
given in response to complaints are important
information for consumers to have. The CMS
website shows the deﬁciencies given in response to
complaints, but not the number and types of
Enforcement of Deﬁciencies.—Sanctions may be
given as a result of a deﬁciency by either the state or
federal government, depending on the facility’s
certiﬁcation status (U.S. HCFA, 1998; U.S. GAO,
1999a). The federal and state governments have
a range of options for issuing sanctions, including
imposing civil money penalties (ﬁnes), or a temporary
hold on new admissions until corrections have been
made. Sanctions can be imposed immediately when
deﬁciencies are serious or cause immediate jeopardy
to residents, or when the facility has a repeated
record of noncompliance (IOM, 2001d). Ultimately,
a facility may have its certiﬁcation for participation
in the Medicare and/or Medicaid programs termi-
nated if problems are serious enough and the NF
does not correct them, but this occurs infrequently
(IOM, 2001d). NFs have a right to appeal deﬁcien-
cies and sanctions, and sometimes appeals lead to the
reversal of even the most severe problems. Although
deﬁciencies are available on the CMS website,
enforcement actions related to them are not made
Clinical QIs show process and outcome measures
of quality of care for residents. A set of 24 QIs was
developed at the University of Wisconsin (Karon,
Sainfort, & Zimmerman, 1999; Zimmerman et al.,
1995). These QIs are calculated using information
from the individual resident assessments (MDS)
submitted quarterly by each facility to CMS, such
as weight loss, pressure ulcers, incontinence, physical
restraints, and bedfast. The range of high and low
QIs vary widely across facilities (Zimmerman et al.,
1995). The QIs are used by some state regulators to
identify potential quality problems to be examined
in the survey process, and they are used by some
NFs for their own quality assurance/improvement
Selecting QIs.—A key issue is what QIs to select
for consumer information. There are two major sets
of QIs that are being considered. One is the 24
existing QIs developed by the University of Wiscon-
sin for CMS (Zimmerman et al., 1995) and the other
is the new QIs developed by researchers at Abt
Associates for CMS (Abt Associates, 2001; Morris
et al., 2002). The National Quality Forum developed
a consensus panel that has made recommendations
to CMS to include a subset of QIs on its NH-
Compare website. As noted previously, CMS iden-
tiﬁed 8 QIs for inclusion on its website. Five QIs are
important to long-stay residents (those who are in
the facility for more than 90 days): (1) decline in
ability to perform daily activities; (2) infection; (3)
pressure ulcers; (4) physical restraints; and (5) pain.
Another 3 QIs are focused on the needs of short-stay
NF residents (those who are discharged in a few
days): (1) delirium (with and without adjustment);
(2) walking improvement; and (3) pain (Morris et al.,
2002). Final decisions on the selection of QIs were
based on the ﬁndings from the validation studies of
Accuracy.—The QIs are based on self-reported
MDS data submitted by NFs. Some studies have
found accuracy problems in the way the resident
assessments are conducted and the forms completed
(OIG, 2001a, 2001b), and some state survey agencies
do little to audit the accuracy of the MDS data
(GAO, 2002). Moreover, facilities may have an
incentive not to report quality problems, because it
could result in more attention by state surveyors
during the survey process. At the same time, facilities
have a ﬁnancial incentive to report higher acuity
levels (case-mix) to maximize their Medicare re-
54 The Gerontologist
imbursement under the Medicare prospective pay-
ment system and in those states that use case-mix
reimbursement for Medicaid. Approaches to im-
prove the accuracy of the MDS and QI data are
needed (GAO, 2002; IOM, 2001d; OIG, 2001a,
Validation.—The QIs were tested when they were
established for use in the survey process by state
agencies (Karon et al., 1999; Zimmerman et al.,
1995). The QIs, however, were not tested to
determine whether they are directly associated with
the processes of nursing care, nor were they tested to
determine what threshold level would be sufﬁcient to
rate the quality of care in a facility for consumers.
To ensure that the QIs can be used fairly for all NFs
in a report card, the QIs need further validation and
testing to determine how accurately they predict
poor quality of care. Schnelle (2002) tested 7 QIs in
a sample of 30 California NFs that are included in
the California HealthCare Foundation website. CMS
also validated a set of QIs for their website (Morris
et al., 2002). The methodological issues of validating
the QIs and establishing reporting thresholds are
beyond the scope of this paper. Most observers
consider that public reporting of the QIs should
incorporate stringent standards, so that only those
indicators found to be accurate, reliable, and valid
would be included in a consumer information
Risk Adjustment and Other Issues.—Some of the
original QIs were developed with risk adjusters to
take into account the increased probability of having
some conditions (Zimmerman et al., 1995). CMS
developed some new risk adjustment procedures for
the QIs that they pilot tested for consumer in-
formation (Morris et al., 2002). The risk factors and
risk adjustment procedures for the QIs are critical
considerations and extremely complex, and these
issues are beyond the scope of this paper. For
a detailed review of risk adjustment issues, see Mor
and colleagues (2002) and Mukamel and Spector
(2002). Researchers need to resolve these technical
issues to determine what risk adjustments are needed
for those QIs that are used in public information
systems. There are many other technical issues that
need to be resolved for reporting QIs to consumers.
These include the sample size and stability issues,
ranking issues, selection bias, ascertainment bias,
and other issues (see Mor et al., 2002).
The QIs can be valuable components of a con-
sumer information system (Schnelle, 2002). Facilities
with better outcomes (lower QIs) can be differenti-
ated between those with average QIs or poorer out-
comes (higher QIs). If a facility has poor outcomes,
this could alert consumers to be cautious. Con-
sumers may also use the QI information during an
NF visit to ask detailed questions of staff about
speciﬁc concerns (e.g. weight loss, pressure ulcers).
Reporting such information can help facilities focus
on improving resident outcomes.
Consumer information on NF quality is increas-
ingly becoming more available. There are a number
of stakeholders who want and would use the
information, although not all users would want the
same type and degree of information. The federal
government has created a website that makes
information on NFs readily available. Although this
is an important ﬁrst step, more comprehensive,
reliable information is needed to prevent misleading
the public and to provide information that will allow
consumers to make informed choices and to monitor
quality in facilities. The data made available on NF
consumer websites need to be as inclusive and
accurate as possible. Much can be done to improve
the quality of the data available and to make the
data more accessible and meaningful to the public.
The issue of what information to provide is
evolving from the current work of researchers and
CMS. Stafﬁng data are important information for
consumers to have because if stafﬁng levels are
inadequate, the quality of care provided will be less
than optimal (CMS, 2001). The deﬁciency, com-
plaint, and enforcement action data are also im-
portant information for consumers to have as they
represent the judgment of outside evaluators. Clini-
cal QIs can be vital elements to include as process
and outcome measures when developing a NF report
card or performance reporting system. Structural
measures, such as facility characteristics and resi-
dent characteristics, can be reported to help con-
sumers ﬁnd a facility that meets their preferences
and some of these have been shown to be related to
quality. Financial information is also needed to more
fully inform consumers how resources are utilized
and ultimately about a facility’s ﬁnancial stability.
States and CMS could develop and publish ﬁnancial
indicators that are related to quality to inform the
public. This paper has developed the rationale and
the approach for designing a comprehensive con-
sumer information system that could allow consum-
ers to compare, select, and monitor NFs on the basis
of quality. The new Internet websites need to go
beyond providing simple information to helping
consumers with rating facilities, interpreting the
information, and guiding consumers in selecting and
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Received May 14, 2002
Accepted September 20, 2002
Decision Editor: Laurence G. Branch, PhD
Vol. 43, Special Issue II, 2003 57