Cost and Quality

Abstract

Although both quality and cost are important concerns for long term care (LTC) facility management and policy, the relationship between cost and quality is poorly understood. Such knowledge is necessary to guide facility management and policy action. We sought to determine the net effect of quality on cost in LTC hospital settings. A 4-year panel dataset from April 1997 through March 2002 comprising observations from 99 LTC hospitals were included in this analysis. We examined the relationship between direct resident costs and 7 indicators of quality for long-stay residents. We used panel data methods to control for unobserved facility-level characteristics. We found that increases in restraint use and incident pressure/skin ulcers were associated with lower per diem costs, whereas incontinence prevalence was associated with higher per diem costs. Our results point to different implications regarding cost and quality for different quality indicators. Although facilities have a strong internal business case to improve quality in incontinence, policy-makers may need to provide financial incentives to encourage reductions in restraint use and incident skin ulcers so as to defray potential higher costs associated with improving quality in these areas.