The following by Marc Zimmet is in response to a study published in the Journal of the American Medical Directors Association (JAMDA) this week that the researchers say shows a clear association between higher Medicaid funding and nursing home star ratings in Care Compare.

Researchers from UMass-Boston found higher Medicaid payment rates increased the probability of nursing homes receiving four or five-stars for the overall ratings, health inspection, and staffing domains of the rating system.

Zimmet is the CEO of Zimmet Healthcare Services Group and frequent contributor/disruptor to Park Place Live.

Close but No Cigar

This one (JAMDA study) gets a step closer to reality, but it’s just another in a long line of oversimplified, myopic studies that fail to capture the fundamental problem with revenue-side SNFonomics.

Higher Medicaid base rates do not consistently translate into higher staffing hours per resident day. To measure consistently, rates must be defined in nominal and relative terms and then evaluate the variables that drive them. The industry is guilty of the same reimbursement sins of policymakers – pretending that all SNFs are created equal and ignoring fundamental realities of Medicaid rate construction, then calibrating to the same scale.

When we strip out pseudo-SNFs (CCRCs, Hospital-Based, specialty-care programs), we find that elevated nominal rates are largely absorbed by structural cost pressures – especially in higher labor markets with high union penetration and legacy rate-setting systems tethered to a favorable base-year. There are mid-rate states that report comparatively strong staffing performance because their rates were more adequate relative to cost structure, not simply higher in absolute terms.

Welcome to the Real World

Here is the reality of our own multi-domain study:

• Rate adequacy relative to local wage index mattered more than nominal rate level.
• Occupancy stability had a meaningful impact on staffing sustainability.
• Payer-mix strength (Medicare share) subsidizes staffing far more reliably than Medicaid base rate alone (that’s a problem when there isn’t much Medicare left in your market).
• High-rate, high-cost states did not necessarily outperform moderate-rate, lower-cost states on staffing metrics.

Funding Is Not Always the ‘It’ Factor

Our findings differ because SNF profiles and market position are so materially different, measuring them as a single provider class is the fast track to bad policy – that’s the kind of thing we’re trying to correct. It’s not always funding – it’s rate construction.

So, no JAMDA, higher-rate states do not materially or consistently exhibit higher staffing. The correlation is mediated by provider profile, wage environment, occupancy, and cross-subsidization capacity. The funding lever exists, but it operates within a local economic structure, not in isolation. In other words, no dataset stands alone.

State-of-the-States is coming to Park Place Live in March! Please refrain from JAMDA-ing until then.