Improving the quality of nursing home outcomes. Are adequacy- or incentive-oriented policies more effective?

Recent debates over health policy have tended to be between procompetitive solutions and proregulatory ones. This dichotomy, however, seems to be less descriptive of the policy debate over ways to improve nursing home quality. This article argues that a more useful distinction may be between adequacy- and incentive-oriented policies. The nursing home industry and others have argued that the financial and physical resources at the disposal of nursing homes have been inadequate to produce acceptable quality levels. Whether quality requires more resources is tested using the 1983 Iowa Outcome Oriented Survey, but none of the quality measures constructed from these data were significantly associated with higher average costs. On the other hand, nonprofit nursing homes, nursing homes with more professional workers (nurses), and nursing homes that cater to private patients have incentives that may motivate them to provide better quality. These factors were often significantly associated with a variety of the quality measures, suggesting that policies based on incentives may be more effective than adequacy-oriented policies.