In this paper we examine data for nursing homes in NYS and find that prevalence of teams is associated with cost savings when such teams are formally organized, but not when they are self-managed. While the association is highly statistically significant, with a p value of .004, it is not very large in terms of its monetary impact. The most that can be saved by instituting formal teams is around $174,000 per year, which is roughly equivalent to the cost of two residents stays. Nevertheless, the cost savings we are measuring are net costs, reflecting the total savings that can be achieved after any investments in team creation and maintenance, suggesting that formal teams are a cost-saving strategy for nursing homes. Coupled with the information from other studies (see our review in the introduction section) that suggests that teams may result in better patient outcomes, formally organized direct care teams should be considered as an important strategy leading to both better quality care and lower costs.
Despite these encouraging findings, the analysis also raises a puzzling question. We find cost savings over only a relatively low range of penetration of direct care teams, of no more than 13 percent. In fact, at penetration of around 15 percent, we observe increasing costs, that is, diseconomies of scale. While it is not unreasonable to expect that the benefits of teams will level off at some point and perhaps even that diseconomies of scale will set in at really high penetration levels, it is surprising to find that costs are increasing at relatively low levels of penetration. What might explain these findings? Below we consider several hypotheses and compare nursing homes in the downward and upward sloping regimes of the cost curve to offer potential explanations.
One possibility is that the nursing homes in the upward sloping part of the curve are facilities in which teams contribute to higher quality care but at a higher cost. For example, teamwork might increase quality by making it easier for staff to perform some duties, such as transferring or turning a patient. Frequent turning is important for prevention of pressure ulcers. This task is easier to accomplish if performed by two individuals and is, therefore, likely to be done more often when staff is working in teams. Working in teams also increases oversight, by both peers and supervisors, making it more likely that staff will not shirk, adhere to protocol, and perform all tasks as expected. Such increased activities are likely to result in better care and improved patient outcomes, and also higher costs, as staff spends more time on the same activities helping each other, or performing activities that otherwise may not be undertaken at all because of shirking. To test this hypothesis we compared the average number of deficiency citations per bed (all health deficiencies, quality-of-life deficiencies only, and quality-of-care deficiencies only) and the average score of each of the 19 quality measures (QMs) published in the Nursing Home Compare in the fourth quarter of 2006 across the nursing homes in the downward and the upward sloping parts of the cost curve. We found no significant differences (at the 0.05 level) between the two groups, suggesting that the difference in the relationship between costs and team penetration is not likely explained by processes that lead to higher quality. We should, however, note that the measures of quality that were available to us to test this hypothesis are rather crude. The variation in deficiency citations is known to depend on policies of the local state office issuing the citations (Mukamel 1997
), and the QMs in the Nursing Home Compare report card are not risk adjusted for the most part, and have been shown to lead to different quality ranking than QMs with a more extensive risk adjustment (Mukamel et al. 2008
). It is, therefore, possible that our inability to detect a difference in quality between the two groups of nursing homes is due to the inadequacy of the QMs that were available to us.
Another potential explanation is that nursing homes with teams above 15 percent penetration are those that push teams “too far,” imposing this type of work organization on staff that is not inclined, motivated, or comfortable working in teams. Teamwork is associated with both costs and benefits. There are costs, such as meeting times and training of members in team processes that are necessary for the management and maintenance of the team. In a well-functioning team we expect these costs to be more than offset by savings due to increased efficiencies and better patient outcomes. Prior studies, in settings other than the nursing home, have shown that patients treated by better functioning teams experience better health outcomes (Rantz et al. 2004
; Shortell et al. 2004
; Mukamel et al. 2006
;) and that better patient outcomes can be associated with lower costs (Mukamel and Spector 2000
). Not all teams, however, are well-functioning teams (Temkin-Greener et al. 2004
) and the benefits of teamwork may not accrue to teams that are not cohesive and do not work well together. Thus, perhaps nursing homes with higher team penetration are those where management is imposing team structures on staff that do not welcome it and hence those teams incur only the costs and not the benefits of teamwork. To examine this possibility we compared staff satisfaction with their work unit as expressed in their response to the survey question “If I had a chance to change my unit in this facility for the same pay and the same work, I would not want to.” We found no significant differences (at the 0.05 level) between responders in facilities in the upward and the downward parts of the cost curve, suggesting that this may not explain the higher costs when team penetration increases above 15 percent.
Another possible explanation is that the composition of the teams is different in facilities where penetration is higher. Nursing homes with higher team penetration may be those that have progressed further in team development and have created teams that are more extensive and encompass more disciplines, going beyond just nursing staff to include therapists and physicians. Such teams, because of their more specialty-oriented composition, may provide a more extensive and expensive array of services, as the literature on care by specialists versus primary care physicians has demonstrated in other settings (Greenfield et al. 1992
). To test this hypothesis we compared the nursing homes in the two regimes of the cost curve on two measures. We find that physicians are more likely to be members of teams in nursing homes in the upward sloping regime of the cost curve, with 31 percent of direct care workers reporting a physician in their team, compared with only 26 percent of workers in homes in the downward sloping regime of the curve (p
=.03). We also find that the teams in the homes in the upward sloping part of the cost curve are more likely to have more discipline represented (p
=.02), that is, have more specialists.
We should note that these last observations, while possibly explaining the higher costs associated with teams in these nursing homes, when taken together with the prior observation of no differences in quality, raise questions about the benefits of having teams that are more disciplinarily diverse. Further research is clearly needed: to determine whether these results are replicable in other nursing homes; to better understand the differences in team compositions between nursing homes in the two cost curve regimes; and to investigate more carefully the hypotheses we suggest and the cost and quality implications for the use of formal teams in nursing homes.
We should also note several limitations of this study. First, the sample available to us of 135 was small relative to the number of explanatory variables of 16, raising the possibility that the power to detect significant associations might be limited. However, we do find a significant relationship between all the basic cost function variables as well as the formal team penetration variables and costs. Thus, this concern remains only with respect to the self-managed team findings. Furthermore, in a model that included only self-managed team variables and, therefore, had acceptable power (with 13 variables and hence a ratio of 10 between independent variables and observations) we also failed to find a significant relationship between self-managed team penetration and costs (p=.25), contributing to the robustness of our main finding.
We should also note that this study focused on nursing homes in NYS and did not include any proprietary chain facilities. Therefore, the results may not generalize directly to nursing homes nationally. Further research, including different types of facilities, is required.
In summary, this study provides for the first time empirical evidence based on a large sample that formal teams in nursing homes can be cost saving. This conclusion is tempered, however, by the possibility that the composition of the team might be an important factor contributing to its cost effectiveness.