The effect of case mix and quality on cost differences between hospital-based and freestanding nursing homes

The considerably higher cost per patient day in hospital-based compared with freestanding nursing homes is well known. In this study, data from a random sample of 1,843 patients from 78 freestanding and hospital-based nursing homes in Colorado were used to explore the extent to which this higher cost can be explained by differences in case mix and quality of care. These differences were found to be associated with approximately 40% of the difference in cost, with case mix accounting for the majority of this effect. Although these findings are based on data from one state, they strongly suggest that Medicare and Medicaid nursing home policies should take case mix into account in reimbursing hospital-based and freestanding nursing homes.