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For many years, advocates for nursing home residents have argued that when residents are denied good care, the costs of trying to treat and correct avoidable conditions and bad resident outcomes are high.  Advocates refer to this phenomenon as "the high cost of poor care."  Others identify the phenomenon as "the business case for quality."  Real savings are possible for the Medicare program, including reduced hospitalizations, when nursing home residents are provided better care in their nursing facilities.  Additional savings could be achieved if the following changes are made to the Medicare program:

1. Stop Paying for Antipsychotic Drugs for Nursing Home Residents Who Do Not Have a Diagnosis Supporting Their Use

Reviewing Medicare claims data for the six-month period January-June 2007, the Office of Inspector General (OIG) reported in April 2011, in Medicare Atypical Antipsychotic Drug Claims for Elderly Nursing Home Residents, that 1,263,641 of atypical antipsychotic drug claims (88%) were for nursing home residents who were diagnosed with dementia.[1]  In April 2005, the Food and Drug Administration (FDA) issued "black box" warnings against prescribing atypical antipsychotic drugs for patients with dementia, cautioning that the drugs increased dementia patients' mortality.[2]  (In June 2008, the FDA extended the warning to all categories of antipsychotic drugs, conventional as well as atypical, and advised health care professionals, "Antipsychotics are not indicated for the treatment of dementia-related psychosis."[3])  The 2011 OIG report concludes, "In total, 95 percent (nearly 1.4 million) of Medicare claims for atypical antipsychotic drugs were for elderly nursing home residents diagnosed with off-label conditions and/or the condition specified in the boxed warning."  The Medicare program spent hundreds of millions of dollars on these drugs in the six-month period.

In a May 9, 2011 statement separate from the OIG report, Inspector General Daniel R. Levinson set out the highlights of the report and wrote, "Too many [nursing homes] fail to comply with federal regulations designed to prevent over medication, giving nursing home patients antipsychotic drugs in ways that violate federal standards for unnecessary drug use."[4]    In Mr. Levinson's view, "Government, taxpayers, nursing home residents, as well as their families and caregivers should be outraged – and seek solutions."  Mr. Levinson also commented on an additional issue not explored in the report – the off-label promotion of antipsychotic drugs by pharmaceutical companies – citing lawsuits, settlements, and criminal prosecutions of drug companies.

As the Center wrote in an Alert in March 2011, reducing residents' use of both atypical antipsychotic drugs and conventional antipsychotic drugs (which were not studied by the Inspector General) would save hundreds of millions of dollars and improve care for residents.[5]

2.  Improve Nurse Staffing Levels in Nursing Homes, Reducing Avoidable Bad Outcomes for Residents and Avoidable Hospitalizations

A decade ago, the Centers for Medicare & Medicaid Services (CMS) documented the inadequate nurse staffing levels in nursing homes nationwide, reporting that 91% of facilities failed to meet one or more staffing requirements to prevent avoidable harm to residents and that 97% lacked sufficient nursing staff to meet five key care processes required by the federal Nursing Home Reform Law (dressing/grooming, exercise, feeding assistance, changing wet clothes and repositioning, toileting).[6]

Medicare reimbursement rates for skilled nursing facilities (SNFs) are high and include significant amounts for nursing staff.[7] The highest rates paid by CMS this year, for example, are $869.42 per person, per day for an urban facility and $879.72 for a rural facility.  Of those amounts, $566.57 of the urban rate and $541.34 of the rural rate are meant by CMS to go toward nursing staff.[8]  However, the Medicare program does not specifically require that SNFs spend their reimbursement in the categories identified by CMS.

Ensuring that SNFs employed sufficient numbers of well-trained nursing staff would save Medicare dollars in the long run.  Evidence-based research has made this point for many years.  Poor care outcomes resulting from inadequate staffing lead to high health care costs in nursing homes and hospitals that could have been avoided with better staffing. 

A recently-published study of infection control deficiencies in nursing homes found that low nurse staffing at all levels (registered nurses, licensed practical nurses, and nurse aides) was correlated with infection control deficiencies; that nearly 388,000 nursing home residents' deaths each year are attributed to infections; that approximately 25% of all hospitalizations of nursing home residents are caused by infections; and that the costs associated with infections range from $673 million to $2 billion.[9]

Twenty years ago, the Subcommittee on Aging of the Senate Committee on Labor and Human Resources identified the high cost of poor care.  Nursing Home Residents Rights: Has the Administration Set a Land Mine for the Landmark OBRA 1987 Nursing Home Reform Law?, 102nd Cong., 1st Sess. (June 13, 1991) described "what happens if we don't give good care."

Explosively expensive care is required to redress the effects of poor nursing care for residents in nursing homes.  Inadequate numbers of nursing assistants, poorly supervised by licensed nurses, lead to breaks in care or inappropriate care.  Basic care, food, fluids, cleanliness, sleep, mobility and toileting, when not carried out, leads to devastating outcomes for residents and additional expense for the government.[10]

The Staff report identified a few of the poor care outcomes, their causes and their estimated costs:

  • "Lack of toileting leads to urinary incontinence," which leads to "skin irritation, decubitus ulcers, urinary tract infections, additional nursing home admission and hospitalization" and is estimated to cost $3.26 billion annually. 
  • "Poor hydration, nutrition, mobility and cleanliness lead to pressure ulcers," whose treatment costs are estimated to range between $1.2 and $12 billion.
  • Use of chemical restraints is a major cause of falls, including hip fractures, which are estimated to cost $746.5 million.
  • "Poor care leads to excess hospitalizations," costing nearly $1 million.

Most recently, in April 2011, the National Consumer Voice for Quality Long-Term Care (Consumer Voice) issued a new report, The High Cost of Poor Care: The Financial Case for Prevention in American Nursing Homes,[11]  which updated its own 20-year old report, The High Cost of Poor Care – The Cost-Effectiveness of Good Care Practices, and, once again, provided research-based data on the high, and often avoidable, costs of poor care:

  • Falls: Studies indicate that three-quarters of all residents have at least one fall each year, and a quarter of the falls require medical attention.  Twenty to thirty percent of the falls are preventable.  Falls cost, on average, $19,440 and hip fractures, more than $35,000.
  • Pressure ulcers: Pressure ulcers are largely preventable, but nevertheless prevalent in nursing homes.  The costs to treat them are high.  The total annual cost of treating all pressure ulcers (not just those of nursing facility residents) is $11 billion.
  • Urinary incontinence: Two-thirds of residents have urinary incontinence, with direct costs of $5.3 billion per year.
  • Malnutrition: Malnourished residents are more likely to have pressure ulcers and fractures and to be hospitalized more frequently.
  • Dehydration: Each hospitalization of a dehydrated resident costs, on average, more than $18,000.  Dehydration is often avoidable if residents are given more fluids.  Insufficient staffing leads to less fluid intake by residents.
  • Ambulatory care-sensitive diagnoses and avoidable hospitalizations: Ambulatory care-sensitive diagnoses are diseases for which hospitalization can typically be avoided with adequate primary care.  They are often used as a proxy for avoidable hospitalizations.  A high percentage of resident hospitalizations are for conditions that fall into this category, such as congestive heart failure, asthma or diabetes.  Research found that New York State spent more than $1.2 billion for avoidable hospitalizations over a five-year period.


Simple, reasonable solutions such as not paying for unnecessary drugs and requiring adequate nursing staff can reduce the federal deficit while actually improving the Medicare program and the quality of care received by beneficiaries.  Such solutions are better than simply shifting costs from the federal government to individuals.


[1] Office of Inspector General, Medicare Atypical Antipsychotic Drug Claims for Elderly Nursing Home Residents, OEI-07-08-00150, pages 14-18 (April 2011),
[2] FDA, “Public Health Advisory: Deaths with Antipsychotics in Elderly Patients with Behavioral Disturbances” (April 5, 2005),
[3] FDA, “Information for Healthcare Professionals: Conventional Antipsychotics,” FDA Alert (June 16, 2008),…oviders/DrugSafetyInformationforHeathcareProfessionals/ucm084149.htm.
[4] Daniel R. Levinson, “Overmedication of Nursing Home Patients Troubling” (Statement, May 9, 2011),
[5] Center for Medicare Advocacy, “Reducing Antipsychotic Drug Use in Nursing Homes: Save Residents’ Lives, Saves Billions of Medicare Dollars” (March 17, 2011),
[6] Centers for Medicare & Medicaid Services (CMS), Appropriateness of Minimum Nurse Staffing Ratios in Nursing Homes, Phase II (Winter 2001).
[7] The nursing component also includes social services and non-therapy ancillaries, three-quarters of which are pharmacy-related.  76 Fed. Reg., at 26,382.
[8]  76 Federal Register 26,364, at 26,373-26,377 (Tables 5A, 5B, 6A, and 6B).
[9] Nicholas G. Castle, Laura M. Wagner, Jamie C. Ferguson-Rome, Aiju Men, and Steven M. Handler, “Nursing home deficiency citations for infection control,” Am J Infect Control 2011;39:263-269 (May 2011).
[10] Subcommittee on Aging of the Senate Committee on Labor and Human Resources, Nursing Home Residents Rights: Has the Administration Set a Land Mine for the Landmark OBRA 1987 Nursing Home Reform Law?, 102nd Cong., 1st Sess., page 175 (June 13, 1991).
[11] Lani G. Gallagher, The High Cost of Poor Care: The Financial Case for Prevention in American Nursing Homes (April 2011),


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