The way in which states reimburse for nursing home capital costs can create incentives for nursing home owners to use the home primarily as a vehicle for real estate speculation, with potentially adverse consequences for patient care. In order to help promote and control the stability, adequacy, and quality of capital investment in long-term care, an increasing number of states are using a fair-rental approach for calculating capital reimbursement. In this article we compare the fair-rental approach with traditional cost-based capital reimbursement in terms of administration and policy. We discuss issues of concern to the state (cost and reimbursement design options) and the investor (after-tax cash flows, rate of return, etc.). Our analysis suggests that fair-rental systems may be superior to traditional cost-based reimbursement in promoting and controlling industry stability, while at the same time providing an adequate return to investors, without incurring long-term increases in the costs of administering programs.
Administrative and Policy Issues in Reimbursement for Nursing Home Capital Investment
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Heidi Boerstler, Tom Carlough, Robert E. Schlenker; Administrative and Policy Issues in Reimbursement for Nursing Home Capital Investment. J Health Polit Policy Law 1 June 1991; 16 (3): 553–572. doi: https://doi.org/10.1215/03616878-16-3-553
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