This study analyzes the failure of current regulatory efforts to elicit an acceptable level of performance in long-term care facilities and proposes a strategy for correcting that failure. Seven factors are identified as being responsible for the failure of current regulatory efforts: inadequate financing, inadequate knowledge, bureaucratic apathy, legal constraints, political constraints, a fragmentation of agency responsibility, and a shortage of conforming beds.

Public utility status, market regulation, and non-profit control are reviewed and rejected as alternatives to the current approach. A new strategy aimed at improving the regulatory process and environment is proposed. The process can be improved by adopting a program rather than taking a functional approach to agency organization; linking the inspection and rate-setting processes; creating a role for consumer groups in the inspection process; and exposing the process and results of regulation to public scrutiny. Five proposals are offered for improving the regulatory environment. These focus on eliminating barriers to entry, supporting alternatives to institutionalization, federalizing the Medicaid program, abandoning exclusive reliance on the medical model as the guide for regulatory standards, and changing the focus of regulation from structure-process to outcome.

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