Chapter 12 Long-Term Care Quality Learning Objectives Understand the concept of quality improvement and how it applies to long-term care Identify the similarities and differences between quality assurance and continuous quality improvement Discuss and compare outcomes-based measures and process-based measures Learning Objectives (continued) 4. Discuss the value of a systemwide approach to management of quality 5. Identify government and private resources available to assist providers’ quality improvement programs Defining Quality Means different things to different people A matter of judgment Measures “goodness” Involves both technical care and interpersonal exchanges Quality of life is increasingly important Measuring Quality Most common measurement methods: 1. Process 2. Structure 3. Outcomes Quality Initiatives Two categories: External – Systemwide Internal – Provider-administered Systemwide Quality Improvement Programs Government initiatives: Regulation Public information initiatives Quality-related research Regulation of Quality History of quality regulation: Quality assurance Minimum data set (MDS) OASIS Quality improvement organizations (QIO) QAPI Pay-for-performance Public Information Initiatives Nursing Home Compare Five-Star Quality Rating system Quality-Related Research AHRQ National Library of Medicine Private Quality Programs Private initiatives: Quality First Organizational programs (AHCA/NCAL, AQNHC, AHQA, NQF) Advancing Excellence in America’s Nursing Homes Accreditation Private foundations College and university research institutes Internal (Provider-Administered) Quality Improvement Programs Quality Assurance (QA) Continuous Quality Improvement (CQI) Quality Improvement (QI) Developing a QI Program Need top-level support Must be mission based Define the organization’s customers Determine standards Measure against standards Evaluate data Take steps toward improvement Ongoing measurement and evaluation Quality Teams May have several teams Each team:Is multidisciplinaryIncludes those closest to the topic areaIncludes others based on expertiseReports to a central committee Technology Improved data collection and interpretation using information technology: Faster More accurate Easier to store data Summary Long-term care quality is difficult to define and measure. Yet, numerous initiatives by providers, government, and outside agencies show a strong commitment to quality and progress. Amazon For your Module 3 SLP assignment, continue to do research on the company that you wrote about for Modules 1 and 2. For this assignment, you will be estimating the weighted average cost of capital (WACC) for your chosen company. The final calculation will be fairly straightforward, as it involves just plugging in some numbers into an equation. However, the more challenging task will be finding the necessary numbers to plug into the formulas. You will need information such as the beta for .

1. Chapter 12
Long-Term Care Quality
Learning Objectives
Understand the concept of quality improvement and how it
applies to
long-term care
Identify the similarities and differences between quality
assurance and continuous quality improvement
Discuss and compare outcomes-based measures and process-
based measures
Learning Objectives (continued)
4. Discuss the value of a systemwide approach to
management of quality
5. Identify government and private resources available to
assist providers’ quality improvement programs
Defining Quality
Means different things to different people
A matter of judgment
Measures “goodness”
Involves both technical care and interpersonal exchanges

2. Quality of life is increasingly important
Measuring Quality
Most common measurement methods:
1. Process
2. Structure
3. Outcomes
Quality Initiatives
Two categories:
External – Systemwide
Internal – Provider-administered
Systemwide Quality
Improvement Programs
Government initiatives:
Regulation
Public information initiatives
Quality-related research
Regulation of Quality
History of quality regulation:
Quality assurance
Minimum data set (MDS)
OASIS
Quality improvement organizations (QIO)
QAPI

3. Pay-for-performance
Public Information Initiatives
Nursing Home Compare
Five-Star Quality Rating system
Quality-Related Research
AHRQ
National Library of Medicine
Private Quality Programs
Private initiatives:
Quality First
Organizational programs (AHCA/NCAL, AQNHC, AHQA,
NQF)
Advancing Excellence in America’s Nursing Homes
Accreditation
Private foundations
College and university research institutes
Internal (Provider-Administered) Quality Improvement
Programs
Quality Assurance (QA)
Continuous Quality Improvement (CQI)
Quality Improvement (QI)

4. Developing a QI Program
Need top-level support
Must be mission based
Define the organization’s customers
Determine standards
Measure against standards
Evaluate data
Take steps toward improvement
Ongoing measurement and evaluation
Quality Teams
May have several teams
Each team:Is multidisciplinaryIncludes those closest to the topic
areaIncludes others based on expertiseReports to a central
committee
Technology
Improved data collection and interpretation using information
technology:
Faster
More accurate
Easier to store data
Summary
Long-term care quality is difficult to define and measure. Yet,
numerous initiatives by providers, government, and outside
agencies show a strong commitment to quality and progress.
Amazon
For your Module 3 SLP assignment, continue to do research on

5. the company that you wrote about for Modules 1 and 2. For this
assignment, you will be estimating the weighted average cost of
capital (WACC) for your chosen company. The final calculation
will be fairly straightforward, as it involves just plugging in
some numbers into an equation. However, the more challenging
task will be finding the necessary numbers to plug into the
formulas. You will need information such as the beta for your
company, the bond-rating, and various information from its
balance sheet. Links to some suggested Web pages for finding
this kind of information is included in the instructions, but you
might be able to find other sources of information. Go step by
step and present your information for Steps 1-4 below in a Word
document. Make sure to show all of your steps one by one and
include the sources of your information:
1. Find out your chosen company's credit rating. Rating
agencies such as Moody’s and Standard and Poor’s assign
ratings to companies. AAA is high, AA is lower, BBB is even
lower, etc. The higher the rating, the lower the cost of debt
capital. Explain what your company’s credit rating is and the
reasons for the high or low rating based on your research. Also,
use the Fidelity Fixed Income Web page to find out what the
current return is for a 30-year bond for a corporation with the
rating that your company has. This yield will be the
approximate cost of debt capital for your company. We will call
the cost of debt RD.
2. Now estimate the cost of equity for your company. First you
will need the beta; you already found this for your Module 1
SLP. You will also need the three-month treasury bill yield,
which we will use as our measure of the risk-free rate. This rate
should be listed on the Fidelity Fixed Income Web page linked
above. Finally, you will need the equity risk premium. You can
find estimates of this on many Web pages including Fidelity
Fixed Income or Gutenberg Research. It is usually around 5%.
Once you have this information, you can estimate the cost of
equity as the 30-year treasury bill yield rate plus beta multiplied
by the equity premium:

6. Cost of Equity = risk-free rate + Beta * (Equity Premium).
Show your calculations. We will call the cost of equity RE.
3. Now find out how much of the firm's capital is equity and
how much is debt. For the total value, look at the balance sheet
for your company as found on Google Finance or a similar Web
page. The total value of your company will be “total liabilities
and shareholder’s equity.” The proportion of debt will be total
liabilities divided by total value, which we will call D/V. The
proportion of equity will be shareholder’s equity divided by
total value, or E/V. If you calculate them correctly, the
proportions will add up to one.
4. Now we have all the information we need to get at least a
rough ballpark estimate of WACC. Let’s assume a corporate tax
rate of 35%. So the formula we will use is WACC = (E/V)*
RE +(D/V)* RD *(1-.35)
Calculate WACC and show your computations. As a “reality
check” on your calculations, the WACC should likely be in the
single digits and positive. Compare what you found to the
average WACC in your company’s industry, which should be
available on Web pages such as Cost of Capital by Sector (US).
Note that 35% is the official corporate tax rate, but many
corporations find tax breaks. If your WACC is too low, try
computing it with a lower tax rate such as 25% or 10%.
Background Readings
Start off the module by viewing these videos from Professor
Roberts of the Wharton School of Business at the University of
Pennsylvania and Professor Roberts of Rice University. These
videos will give you a general overview of the key concepts of
capital budgeting and the cost of capital:

7. Roberts, M. (2017). Decision criteria. Coursera. Retrieved from:
https://zh.coursera.org/learn/wharton-
finance/lecture/hRuBX/decision-criteria
Weston, J. (2017) Putting it all together as WACC (weighted
average cost of capital). Coursera. Retrieved from:
https://www.coursera.org/learn/finance-for-non-
finance/lecture/07ldB/putting-it-all-together-as-the-wacc-
weighted-average-cost-of-capital
Ross, S., Westerfield, R., & Jordan, B. (2007) Chapter 8: Net
present value and other investment criteria. Essentials of
Corporate Finance. McGraw Hill.
http://novellaqalive2.mheducation.com/sites/dl/free/007000000x
/484691/Part5_Chap8.pdf [If the link is down, click Net Present
Value or Fundamentals of Corporate Finance for an alternative
link]
Ross, S., Westerfield, R., & Jordan, B. (2007) Chapter 12: Cost
of capital. Essentials of Corporate Finance. McGraw Hill.
Retrieved from:
http://novellaqalive2.mheducation.com/sites/dl/free/007000000x
/484691/Part7_Chap12.pdf
[If the link is down, click Cost of Capital or Fundamentals of
Corporate Finance for an alternative link]
Finally, check out the following video that will show you how
to make capital budgeting calculations using Excel:
Graulich, V. (2012). How to calculate NPV and IRR.
IHateMath.com. Retrieved from:
https://www.youtube.com/watch?v=kCnwCplibAk&t=230s
Hamilton, K. (2014). Excel NPV IRR. Retrieved from:
https://www.youtube.com/watch?v=HTJh5yxphMs