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Nursing Home Privatization: What is the Human Cost?

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In response to increasing financial pressure and cuts in reimbursement, Pennsylvania county governments are considering privatizing county-owned nursing homes. The idea of saving money by turning county nursing homes over to private operators appeals to county leaders seeking to relieve budget pressures. But what happens to the quality of care when counties turn their nursing homes over to private firms?

This report investigates the effects of privatization or attempted privatization on the quality of care at several county and former county nursing homes in western Pennsylvania: Allegheny County’s John J. Kane Regional Centers, where privatization was proposed but not implemented; Comfort Home, which remained public but whose operation was taken over by a for-profit management company; and Chelsea Manor, which was sold outright to a nonprofit entity created by the county for the purpose of buying the facility. The report compares these homes with one another and with Green Gables, a private nursing home that is characterized by low wages, high employee turnover, and poor quality of care.

The study draws the following conclusions:

  • Although staffing levels declined whether or not privatization was ultimately carried out, the most significant staffing cuts occurred where privatization was taken furthest. After the privatization of Chelsea Manor (the home sold to a newly created private non-profit organization), staffing levels appeared to be nearly identical to those at the low-quality private home—a home where understaffing led state investigators to suspend admissions temporarily in 1997.
  • Workers’ wages and employee turnover, two factors affecting care continuity, were most negatively affected at the home where privatization proceeded furthest. At the Kanes and Comfort home (where collective bargaining continued), workers’wages, benefits, and employee turnover remained stable. At Chelsea Manor, wages fell to levels almost identical to those at Green Gables (where staff turnover was rampant). Turnover at Chelsea Manor appeared to be increasing towards that at Green Gables.
  • At both homes where some form of privatization was implemented, workers complained about shortages of medical and patient care supplies. Both of these homes seemed to have a more serious problem in this area than the Kanes, but at neither home was the problem as serious as at Green Gables.
  • The quality of care at all three of the county and former county homes deteriorated, regardless of whether privatization was actually carried out or only proposed. Once again the worst declines in quality occurred where privatization was taken furthest. After privatization, Chelsea Manor began to develop a pattern of unexplained resident injuries, some of which were not properly investigated or reported. Chelsea Manor’s problems were similar in nature, though not in extent, to quality problems at Green Gables, where several hundred such incidents occurred in a recent 18-month period.
  • Even the best homes in the study, the Kanes and Comfort Home, are now unable to meet all the physical, emotional, and social needs of their residents, even though they exceed federal and state standards for staffing ratios. All of the nursing homes described in this report, in varying degrees of urgency, need more nurses’aides.
  • As do the Kanes, county nursing homes across Pennsylvania have much lower turnover among nurses’ aides than is typical for private homes. Combined with the case studies, this strongly suggests that nursing home privatization may, in many cases, worsen the quality of care.

In an earlier Keystone Research Center report, Susan Eaton outlined a comprehensive set of policy recommendations designed to improve the quality of both private and public long-term care in Pennsylvania (Table 3 on page 34 lists Eaton’s proposals). The present report highlights four recommendations designed to accomplish a narrower goal: prevent nursing home privatization from undercutting the quality of care.

  • A current state requirement that counties pay for a portion of the operating costs of county nursing homes should be repealed. This requirement effectively means that counties receive a lower state reimbursement than would private homes serving identical populations. The result is an artificial incentive to privatize. (Through ad-hoc compromises involving the use of federal funds, counties are currently relieved of the state-imposed obligation to contribute to county nursing homes. There is no guarantee, however, that this relief will remain in place.)
  • The Auditor General should conduct an audit of Health Department surveys from a sample including (1) county nursing homes, (2) all privatized or former county homes, and (3) private homes serving the same resident population as county homes. The present report, based on case studies and worker interviews, reveals the underlying dynamics that can lead privatization to erode quality. Nonetheless, we still need more comprehensive information about the effects of privatization on the quality of care. The recommended audit would give us that information and help Pennsylvania better understand how to provide the less affluent elderly with the high-quality care they deserve.
  • Pennsylvania should implement an annual nursing home report card. A report card should gather together, in a format that is easy to read and understand, information about critical indicators of nursing home quality (such as turnover rates, staffing ratios, wages, and benefits). By making it easier to tell good homes from mediocre and poor ones, a report card would make the market—and consumer choice—more powerful forces for improving quality. A report card might also lead counties and the public to recognize the contribution that good county homes make to quality of life for Pennsylvania’s elderly.
  • Pennsylvania should increase the minimum number of hours of front-line nurses’ aide care that nursing home residents receive. Pennsylvania nursing homes (including those reported on here) can currently meet state staffing requirements and still leave aides without enough time to attend even to residents’ basic needs. As this report shows, privatization or the anticipation of it can exacerbate understaffing. Raising state staffing requirements would improve care quality throughout the Pennsylvania nursing home industry.