Resource Allocation in New York State Long-Term Care Facilities: Changes over Time and Ownership Differences

By Ward, David M. | Journal of Public Budgeting, Accounting & Financial Management, Winter 1998 | Go to article overview

Resource Allocation in New York State Long-Term Care Facilities: Changes over Time and Ownership Differences


Ward, David M., Journal of Public Budgeting, Accounting & Financial Management


ABSTRACT. This paper looks at resource allocation in New York state longterm care facilities. Data from 399 nursing facilities are used to compare resource allocation in 1983 and 1990. Given significant changes within the industry, it was hypothesized that significant changes would have occurred over the seven year period. Results indicate that growth in full time equivalents was 7.6 percent or an average of 13.5 employees. The allocation of resources across job title was, however, constant over the seven year period. Differential growth rates were found by ownership category, but there were only minimal differences with respect to the allocation of resources.

INTRODUCTION

The manner in which organizations allocate their resources is, in many respects, a blueprint of the production function for that particular organization. Much like a blueprint for a house, there is no single correct plan, but rather many possible ways of combining resources to produce the product. By analyzing the manner in which organizations allocate their resources, we can attempt to identify systematic differences that may exist in the production function across different types of organizations. As resources become increasingly scarce, a fuller understanding of allocation patterns may help to generate a more efficient market.

This paper will look at resource allocation in New York State's longterm care facilities. It will identify patterns of resource allocation that may distinguish different types of facilities and whether or not these patterns have been consistent over time.

BACKGROUND

Currently, expenditures on nursing facilities account for 9 percent of all personal health care expenditures (personal health care expenditures include: expenditures on hospital care, physicians' services, dentists' services, other professional services, home health care, drugs and other medical non-durables, vision products and other medical durables) (Health Care Financing Administration, 1992). For the three most recent years of data, the average annual percent change in nursing facility expenditures has exceeded the annual percentage change for hospital care, physician services, and dental services. So while nursing facility expenditures are currently a relatively small proportion of total national health care expenditures, its proportion of that total will grow if the annual change continues to exceed the overall growth in expenditures for other components of health care. This becomes especially true when one takes into consideration the increase in the proportion of the population over 65 years old (Eastaugh, 1992).

With or without a clear understanding of resource allocation in nursing facilities, the current movement toward less government involvement in everything from health care to education and welfare makes it imperative for managers of nursing facilities to understand how and why costs vary from one nursing home to another. While it is not known exactly how efforts to reduce the deficit at both the Federal and State level will ultimately affect Medicaid and Medicare, it is certainly reasonable to assume that actual reductions or reduced growth lies ahead. With government support of nursing facilities accounting for 54 percent (Health Care Financing Administration, 1992) of total revenues, the fundamental shift in government policy currently underway may have significant repercussions for the individual nursing facility. Managers are going to be faced with the need for sound fiscal management in times of reduced resources.

Policy makers and nursing facility managers can both learn a great deal by fully exploring resource allocation. Much can be learned by identifying and comparing subgroups of facilities. For example, the industry has developed in such a way that there are facilities that operate as profit making enterprises (proprietary facilities) while others function as nonprofit organizations (voluntary facilities). …

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