The Effects of Case‐Mix Reimbursement on Ohio Medicaid Nursing Home Costs

Abstract

This article examines empirically the effects of the Ohio case‐mix reimbursement system on nursing home costs. The results show that case‐mix is the single most important factor affecting both direct‐care (nursing staff) and total per diem costs. Although other factors, such as bedsize, occupancy rate, ownership status, county per capita income, and the demand for nursing home care, also affeet costs; they have far smaller effects on costs than case‐mix. Further, the results show that the cost differentials between for‐profit and nonprofit facilities are largely explained by differences in cost response to case‐mix and, to a lesser extent, by differences in cost response to bedsize, Medicaid utilization, county per capita income, demand for nursing home beds, and occupancy rate. The for‐profit facilities in this study cost significantly less than their nonprofit counterparts.