The relationship between nursing home quality and costs: Evidence from the VA

Ensuring quality of care in nursing homes is a public health priority, yet how nursing home quality relates to cost is not well understood. This paper addresses this relationship for 132 VA community living centers (nursing homes), for fiscal years 2014 and 2015. We estimated cost models using the VA Decision Support System which tracks total direct costs and nursing direct costs for individual resident segments of care. We summed residents' total costs and nursing costs to the community living center level for each year. Annual facility costs then were regressed on quality of care measured with composite scores based on 13 distinct adverse events. Results indicated that higher quality was associated with higher predicted cost. However, we did not find evidence that higher costs were driven by high nurse staffing levels.