Impact of Medicare diagnosis-related groups (DRGs) on nursing homes in the Portland, Oregon metropolitan area.

To evaluate the impact of the Medicare Prospective Payment System (PPS) on nursing homes, resident census and staffing data from 78 Portland, Oregon nursing homes were compiled from annual reports filed with the state. Between fiscal years (FYs) 1983 and 1984, (before and after initiation of the Medicare PPS), there was no significant change in the total number of patient-days, but there was a 20.5% increase in the total number of deaths and a significant increase in average facility adjusted death rates (P = .004). Between the previous FYs 1982 and 1983, the total number of deaths had risen only 8.3%, and the average facility adjusted death rate had no significant change. Since initiation of diagnosis-related groups (DRGs), these nursing homes also made sizeable increases in their adjusted full-time registered nurse employment rate, and reported fewer patients reimbursed by Medicare. These same nursing homes were surveyed in spring, 1985 to determine the impact of Medicare DRGs in more qualitative terms. Of the 51 nursing homes (66%) responding, more than half reported increased severity of illness, shorter length of stay, increased prevalence of clinical problems, and increased use of medical supplies. In addition, more than half of the respondents reported increased frequency of requests for Friday and weekend admissions, admission of patients too sick for the facility, and physician phone consultation. These findings indicate that Portland, Oregon nursing homes experienced increased patient severity of illness, explained at least in part by earlier hospital discharge, following DRGs.