Case mix, quality, and cost relationships in Colorado nursing homes

The analyses reported in this article assessed the cost, case mix, and quality interrelationships among Colorado nursing homes. A unique set of patient-level data was collected specifically to measure case mix and quality. Case mix was found to be strongly associated with cost, accounting for up to 45 percent of the variation in cost per patient day. The relationship between quality and cost was weaker; quality variables accounted for only about 10 percent of the cost per day variation. Case mix was also associated with several facility characteristics found to be significant in other cost studies, suggesting that such facility characteristics serve as partial proxy measures for case mix. The cost-case mix relationships appear to be strong enough to justify incorporating case mix directly in nursing home reimbursement systems. In contrast, the weaker cost-quality association implies that it may not (yet) be appropriate to incorporate quality directly in reimbursement.