Culture Change in a For-Profit-Nursing Home Chain: An Evaluation

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Across the United States, new models are emerging that aim to transform the organization of nursing home care. They share the common goals of moving toward more "person-centered" or "resident-directed" care with new operational practices that transform the nursing home environment as much as possible from an institution to a home. In the late 1980s, a national grassroots effort known broadly as the culture change movement started in isolated pockets of the nursing home industry, driven by a variety of independent organizations. Gaining formal status with the formation of the Pioneer Network in 2000, the culture change movement has continued to grow in recent years with the emergence of state culture change coalitions across the country.

Beverly Enterprises, Inc. (BEI) is the parent company of one of the nation's largest nursing home chains. In 2002, Beverly Healthcare (the BEI subsidiary that manages its nursing facilities) implemented a culture change initiative called "resident-centered care" (RCC). This initiative marked a milestone for the culture change movement because it was the first time that a national for-profit corporation had implemented culture change as part of a quality-improvement strategy. Prior culture change models were implemented by nonprofit organizations in a small number of facilities. Given that the majority of the nation's nursing home beds are owned or operated by for-profit companies, Beverly Healthcare's RCC initiative could have broad applications.

This report presents the findings of a 12-month evaluation of that RCC initiative. The evaluation's objectives were: (1) to describe organizational practices associated with the RCC initiative; (2) to determine the degree to which culture change did or did not occur: and (3) to assess potential impacts of RCC on resident quality of life, staff satisfaction, and financial performance.

Methods

Because few tools were available to assess culture change progress, we developed two new instruments: a Culture Change Staging Tool (CCST) and a Culture Change Scale (CCS). The CCST—designed to assess culture change practices associated with facilities—progresses through four stages of culture change, as evidenced by staff behaviors or operational practices was used to collect data from nursing home administrators. The CCST was administered in 7 RCC facilities and 10 non-RCC facilities at three points: baseline (0 months), six-month follow-up, and 12-month follow-up.

Because data collected by the CCST were self-reported, we also developed the CCS in order to assess culture change progress based on staff surveys. The CCS was completed by a total of 812 staff, and we conducted a total of 950 in-person resident interviews, across the three measurement intervals in the 7 RCC and 10 non-RCC facilities. We also analyzed secondary data about financial performance from Beverly Healthcare's internal financial-reporting systems.

Findings

Culture Change Staging Tool. Self-reported data led to the conclusion that RCC facilities, in comparison to their non-RCC counterparts, showed progress by implementing culture change practices in five areas: permanent staff assignment, culture change awareness, informal leadership behavior, resident-directed behavior, and leadership-team behavior.

Culture Change Scale. Staff surveys supported the above conclusion. RCC facilities improved in terms of system-wide culture change, resident choice, organizational design, and overall CCS scores. Non-RCC facilities did not show comparable improvements over time.

Residents' Quality of Life. The RCC initiative had positive effects on two measures of residents' quality of life: choice and autonomy, and dignity. Residents in RCC facilities were afforded more choice in decision-making about their daily lives, and they were treated with greater dignity by staff, compared to residents in non-RCC facilities.

Staff Satisfaction. Staff working in the RCC facilities had greater satisfaction in three areas—training, management, and work environment—and greater satisfaction overall. Most of these differences were attributed to selection bias, as senior leadership at Beverly Healthcare made a strategic decision to implement the RCC initiative in better-performing facilities.

Financial Performance. The RCC facilities had higher profits per resident day and higher earnings before interest, taxes, depreciation, and amortization (EBITDA) per resident day than did non-RCC facilities. There were few differences between RCC and non-RCC facilities in terms of the percentage of private-pay days and the percentage of Medicare days. RCC facilities had a lower percentage of Medicaid days. We attribute these differences in financial performance to selection bias as well.

Implications for Practice

The fact that a financially driven corporation, publicly traded on the New York Stock Exchange, implemented a culture change strategy to try to increase its market share suggests that the culture change movement (which started as a grassroots effort) has diffused into broader segments of the nursing home industry.

There can be a long delay, however, between the implementation of culture change practices and the time when resulting improvements in financial performance are realized. Because Beverly Healthcare's RCC initiative indeed had little effect on payer mix, occupancy, and other short-term measures of financial performance, for-profit entities that remain focused on meeting quarterly financial targets are likely to be disappointed by this strategy. The business case for culture change, however, may ultimately be in the long-term competitive advantages that culture change facilities gain in the marketplace.

Nonfinancial justifications for the RCC program probably make a more compelling argument for culture change than do purely financial ones. Companies stand to reap benefits from culture change related to improved quality of life for residents, better work environments for staff, enhanced leadership, and upgraded physical environments.

The RCC program did not lead to higher operating expenditures in the RCC homes. Most of the gains in organizational performance associated with Beverly Healthcare's RCC initiative were achieved without major capital expenditures for physical renovations. The corporation delayed making major capital investments until 2005 when $7.5 million was budgeted for physical renovations. Most of these renovations were not completed before this study was completed. Most of Beverly Healthcare's investments made during the course of this evaluation (totaling $2 million) were in additional consultant costs, staff salaries, and the cost of travel associated with attendance at culture change training sessions.

Both RCC and non-RCC homes (which were matched by geographic region) had comparable increases in operating expenses between 2003 (before RCC started) and 2005 (after RCC started). RCC facilities saw smaller increases in operating expenses from 2003 to 2005 and maintained lower operating expenses per resident day during this period. The RCC homes created greater value for residents by enhancing their quality of life, and greater value for staff by improving their levels of satisfaction, while maintaining similar operating costs.

Major investments both in capital and human resources will be necessary, however, to implement culture change successfully over the long term. Strategic investments in these areas may be especially challenging within publicly traded for-profit companies. Because physical renovations are by far the most expensive component of many culture change models, the financial returns on capital investments are especially difficult to justify. Capital expenditures should be viewed as part of a broader corporate strategy to reposition a company within an evolving long-term care market. Excluding capital costs (roughly $750,000 per facility), the costs of culture change implementation averaged about $78,413 per facility. Given the lack of immediate financial returns, a more reasonable approach would be to amortize these costs.

Most of Beverly Healthcare's RCC innovations were made with limited capital investments, but its initiative showed success in moving RCC facilities from an institutional stage to a transformational stage. The high cost of physical renovations necessary to implement neighborhood or household models, however, is likely to remain a significant barrier to culture change progress for many providers. Organizations contemplating culture change should carefully consider the investments in human and capital resources needed to successfully implement it.

Implications for Policy

The Omnibus Budget Reconciliation Act of 1987 (OBRA 1987) established a federal mandate to improve the quality of life of nursing home residents. To help fulfill OBRA 1987's requirements, culture change initiatives should be supported by public policies, as this study suggests that culture change is an effective strategy that improves resident quality of life by supporting greater resident choice and autonomy.

Existing public policies, which tend to emphasize health and safety at the expense of quality of life, may be misguided. The institutional model of care—with nurses' stations, long double-loaded corridors, and semiprivate rooms—remains the dominant model for organizing nursing home care. Yet this model is associated with poor quality of life for residents and an unsatisfying work environment for staff.

The culture change movement is striving to transform the nursing home environment, but the capital required to implement culture change models is likely to remain a significant impediment. A new set of metrics should therefore be incorporated into value-based reimbursement systems and consumer report cards in order to place greater emphasis on workforce performance and resident quality of life. Such new culture change metrics would complement more traditional performance metrics such as state-survey compliance and clinical performance.

Still, it will be no simple task for policymakers to balance the competing needs for safety and choice in a way that best meets the current and future expectations of key stakeholders such as residents and their families, consumer advocates, providers, payers, and regulators. The goals of nursing home care pose complex ethical dilemmas that must ultimately be addressed through open public debate.

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Publication Details

Publication Date:
February 1, 2008
Authors:
Leslie Grant
Citation:

L. A. Grant, Culture Change in a For-Profit-Nursing Home Chain: An Evaluation, The Commonwealth Fund, February 2008.

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