What Factors Affect Residential Care Facility Charges?

09/01/2014

What Factors Affect Residential Care Facility Charges?
Executive Summary
September 2014
Sarita L. Karon, PhD, Joshua M. Wiener, PhD, Angela M. Greene, MS, MBA, Galina Khatutsky, MS, and Ruby Johnson, MA, MS
RTI International
Abstract
Unlike nursing homes, most residential care facilities (RCFs) serve individuals who pay privately, and part of the appeal of these facilities is that they cost less than nursing homes. Medicaid does not pay for the room-and-board portion of RCF charges but may pay for some of the services provided. Although most residents are private pay, Medicaid pays for some long-term care services in RCFs for about one-fifth of the residents. There are great variances in RCF charges, depending on locality, state Medicaid policies, facility characteristics, and resident characteristics. Existing studies provide information on average or median RCF charges for residents but offer little insight on which factors explain the variance in charges. This study addresses that gap in knowledge by addressing the following two research questions: (1) At the facility level, what factors affect the average monthly base rates that RCFs charge? (2) At the resident level, how are individual residents' total monthly residential care charges (base rate plus any additional fees) affected by their health conditions and functional status, and by the nature (e.g., amenities, services, staffing, types of living units) of the facilities in which they live?

DISCLAIMER: The opinions and views expressed in this report are those of the authors. They do not necessarily reflect the views of the Department of Health and Human Services, the contractor or any other funding organization.
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Purpose and Research Questions

The long-term care (LTC) delivery system has historically favored institutional services, such as nursing home care, over home and community-based services (HCBS). Over the last 20 years, however, HCBS, including residential care facilities (RCFs), have grown in importance, reflecting consumer preferences. RCFs include a broad array of facilities, many of which provide similar services but go by a variety of names, including assisted living facilities, board and care homes, personal care homes, and homes for the aged. RCFs provide room-and-board plus services to persons who need assistance with activities of daily living (ADLs), such as bathing and dressing, or help with health-related services, such as managing medications. In 2010, there were 31,100 RCFs in the United States serving 733,300 residents of all ages and with a wide range of conditions.

Unlike nursing homes, most RCFs serve individuals who pay privately, and part of the appeal of these facilities is that they cost less than nursing homes. Medicaid does not pay for the room-and-board portion of RCF charges but may pay for some of the services provided. Although most residents are private pay, Medicaid pays for some LTC services in RCFs for about one-fifth of the residents. There are great variances in RCF charges, depending on locality, state Medicaid policies, facility characteristics, and resident characteristics. Existing studies provide information on average or median RCF charges for residents but offer little insight on which factors explain the variance in charges. This study addresses that gap in knowledge by addressing the following two research questions:

  • At the facility level, what factors affect the average monthly base rates that RCFs charge?

  • At the resident level, how are individual residents' total monthly residential care charges (base rate plus any additional fees) affected by their health conditions and functional status, and by the nature (e.g., amenities, services, staffing, types of living units) of the facilities in which they live?

Data and Methods

This study uses merged facility and resident data from the 2010 National Survey of Residential Care Facilities (NSRCF), which was sponsored by the U.S. Department of Health and Human Services (including the National Center for Health Statistics, the Office of the Assistant Secretary for Planning and Evaluation, and the Agency for Healthcare Research and Quality), the U.S. Department of Veterans Affairs, and other federal agencies. The survey focuses on facilities that serve older (aged 65 or older) people and younger adults (aged 18-64) with physical disabilities. Facilities that exclusively served people with severe mental illness or people with intellectual and developmental disabilities were excluded from this survey; however, facilities included in this survey may serve those populations, so people with those conditions are included among the resident sample.

Facilities vary considerably in the ways that they structure monthly charges. The NSRCF facility data report the average monthly base rate charge by the type of living quarters, which varies by the number of people for which it is intended (1, 2, 3, or more) and whether it is a single room or an apartment. Additionally, base rate charges by type of living quarter were reported separately by whether the living unit was part of a designated Alzheimer's/dementia care unit (ADCU) or a general care unit. Facilities may charge all residents the same base rate for a given type of living quarter, or the rate may be adjusted for the resident's level of disability. Further, base rates may be all-inclusive, or facilities may charge additional fees for specific types of services. Table ES-1 describes the types of services that may or may not be included in the base rate charges.

TABLE ES-1. Components of Average Monthly Facility Charges
Average monthly base rate, varies by type of living quarters and whether dementia specific or not.

Base rates may either be flat (i.e., the same for all residents) or may be case mix adjusted.

The base rate may include these services, or the facility may make them available for an additional charge:  
  • Skilled nursing services
  • Incontinence care
  • Transportation to medical or dental appointments
  • Occupational therapy
  • Physical therapy
  • Assistance with ADLs
  • Help with bath/shower at least once/week

Additionally, base rates may include a varying number of meals:

  • 1 meal/day
  • 2 meals/day
  • 3 meals/day
  • No meals

For analysis purposes, we created a single, average monthly facility charge variable. The overall average rate was weighted by the percentage of living quarters located in ADCUs and by the distribution of the types of living units. Details of the construction of this charge are in the Technical Appendix.

The weighted average monthly facility rate reflects the base rate only; it does not include any additional charges that may be imposed. By contrast, the resident-level charges are reported as total charges (i.e., base rate plus any additional charges) to the resident in the last month. The analyses presented in this study for average facility base charges and for the total resident-level charges present a fuller picture of the issues related to determinants of RCF charges. All data represent the amounts charged in 2010 dollars. The amounts charged may differ from the amounts actually paid, at either the resident or facility level.

Results

Several variables, capturing aspects of the facility characteristics, rate structure, staffing practices, living quarters, and types of residents served, had similar effects at the facility and resident levels (Table ES-2). Facilities that offered specialized services to people with dementia, either through an ADCU within a larger facility or as the sole focus of the RCF, had higher charges, as did facilities that charged additional fees at the time of admission. Residents who lived in dementia care units or facilities, and in facilities that charged additional fees at the time of admission, also experienced these higher monthly charges. Facilities that offer greater levels of service, as measured in hours of direct care per resident per day, and that offered more employment benefits to personal care aides (PCAs) had greater average monthly charges, and these higher charges were experienced by residents as well. The type of living quarter provided affected charges. Facilities with a greater share of rooms for two or more people had lower average monthly charges, and the individuals who lived in such quarters were charged less each month. Having greater competition for potential residents, as measured by the number of Medicare-certified nursing facility (NF) and skilled nursing facility (SNF) beds per 1,000 people in the county, had the anticipated effect of lowering charges at both the facility and resident levels. Finally, certain resident characteristics affected charges at both levels. Individuals who had any memory impairment or confusion, and facilities that served greater proportions of residents with such impairments, had higher average monthly charges. Hispanic or non-White residents had lower monthly charges, and facilities that served a greater number of Hispanic or non-White residents had lower average monthly charges.

Average facility-level charges were also affected by other factors, most of which reflect facility policies and rate structure. For-profit RCFs had higher average monthly charges. Facilities that are certified by or participate in Medicaid had lower average monthly charges. Although Medicaid does not pay for room-and-board costs, several states impose limits on what RCFs may charge Medicaid-eligible residents for room-and-board, which may lower the average charges in facilities that participate in Medicaid. Facilities that offer more services in the base rate had higher average monthly charges. Serving a broader range of resident needs, as indicated by a greater number of policies that allow admission of residents with these needs, also increased the average monthly charges. Finally, RCFs that provide services to people with intellectual or developmental disabilities, or to people with severe mental illness, had lower average monthly charges. It is likely that people with these disabilities who are served by the facilities represented in this survey1 (i.e., facilities that do not specialize in serving people with such disabilities), have relatively low care needs.

TABLE ES-2. Summary of Significant Predictors of Charges at the Facility and Resident Levels
Predictors of Average Monthly Base Facility Charge Predictors of Total Monthly Charge to Residents
Facility Characteristics
  • Ownership is for-profit (+)
  • Facility is located in an MSA (+)
  • Other types of health care facilities are located on the grounds (+)
Types of Living Units
  • Percent of units that are rooms for 2 people (-)
  • Percent of units that are rooms for 3+ people (-)
  • Percent of units that are 1-bedroom apartments (-)
  • Resident lives in room designed for 2 people (-)
  • Resident lives in room designed for 3+ people (-)
  • Resident lives in an ADCU or facility (+)
  • Resident's room/apartment has cooking amenities (+)
Facility Rate Structure
  • Extra fees required upon admission (+)
  • Number of services included in base rate (+)
  • Facility participates in Medicaid (-)
  • Extra fees required upon admission (+)
Staffing Levels and Practices
  • Number of employment benefits offered to PCAs (+)
  • Direct care HPRD (+)
  • Number of employment benefits offered to PCAs (+)
  • Direct care HPRD (+)
  • Direct care hours from activities director per resident per day (-)
Types of Residents Served
  • Number of policies that permit admission of residents with specific care needs (+)
  • Facility serves only people with dementia (+)
  • Facility has a dementia special care unit (+)
  • Any residents have developmental disabilities (-)
  • Any residents have severe mental illness (-)
  • Percent of residents with memory impairment or confusion (+)
  • Percent of residents who are non-White (-)
  • Number of polices that require discharge of residents with specific care needs (-)
  • Facility serves only people with dementia (+)
  • Facility has a dementia care unit (+)
  • Resident received any Medicaid-paid LTC in last month (-)
  • Resident is less than 65 years old (-)
  • Resident is White, non-Hispanic (+)
  • Resident has dementia/cognitive impairment (+)
  • Resident uses a manual wheelchair (+)
  • Resident has a brain injury (+)
  • Resident exhibited any behavior symptoms in the last 30 days (+)
  • Number of ADLs for which resident receives help (+)
Market Characteristics
  • Number of Medicare-certified beds in SNF or NF per 1,000 people (-)
  • Number of Medicare-certified beds in SNF or NF per 1,000 people (-)
NOTE: "+" and "-" indicate that the variable significantly increased or decreased charges, respectively.

At the resident level, other factors affecting the monthly charges included both variables that reflect the nature of the facilities in which they live, and characteristics and care needs of the residents themselves. The location of the facility in which a resident lives affects the charges the resident experiences. Residents of RCFs that are in metropolitan statistical areas (MSAs) and of RCFs that are co-located with other health care facilities experience higher monthly charges. Residents of RCFs with greater availability of activities director time had lower monthly charges. It may be that the greater rates of activity time reflect lower care needs of residents, and a substitution of that time for higher-cost nursing time, both of which contribute to lower charges. Residents of RCFs that discharged residents with a greater range of care needs, as indicated by the number of discharge policies in place, had lower monthly charges. Residents of facilities with such discharge policies are likely to be more independent (as they would otherwise be discharged), so that lower charges are understandable. Residents with greater care needs, as indicated by having a brain injury, behavioral symptoms, or greater number of ADL impairments, all experienced higher monthly charges, as did those who use a manual wheelchair. Those who were younger than 65 and those with lower incomes, as indicated by the receipt of any Medicaid-paid LTC in the previous month, had lower average monthly charges. Residents who elected a living unit with cooking amenities had higher monthly charges as well.

Discussion

This research contributes to the scant literature on charges for RCFs. It highlights the complex factors that affect charges, both at the facility and resident levels. These factors include a variety of facility characteristics, policies, and practices; resident characteristics; and market characteristics. At the facility level, the analyses offer understanding of factors affecting the average charges levied by facilities, and provide insight into policies that may be used to control charges. At the resident level, the analyses illustrate factors affecting the total monthly amount that residents are charged, and offer guidance to individuals who are considering life in an RCF.

The findings presented here highlight areas for future research. A key question concerns the role of Medicaid in facilitating access to RCF. Although Medicaid does not pay for the room-and-board costs of RCF care, it may pay for the services provided by those facilities. Additionally, several states have policies that limit the room-and-board rates that RCFs may charge to Medicaid-eligible individuals. The findings here show that RCFs that participate in Medicaid have lower average monthly charges; and individuals who are receiving Medicaid-paid LTC are charged less than those who are not. Further research could illuminate the ways in which Medicaid policies and practices affect charges and the services available to low-income individuals.

Finally, although some facilities served people with intellectual and developmental disabilities or with severe mental illness, those that served such people exclusively were excluded from the survey. The findings presented here thus are only a partial picture of the experiences of people with those types of disabilities. Additional inquiry is needed to better understand the types of facilities in which people with intellectual and developmental disabilities and mental health disabilities live, and the factors that affect the charges they experience.


NOTES

  1. Facilities that exclusively serve people with intellectual or development disabilities or people with severe mental illness were not included in the NSRCF.


The Full Report is also available from the DALTCP website (http://aspe.hhs.gov/office_specific/daltcp.cfm) or directly at http://aspe.hhs.gov/daltcp/reports/2014/RCFcharge.cfm.