Medicaid Medicare Nursing Homes P4P

Value-Based Purchasing in Nursing Homes

More than 3 million frail and disabled individuals rely on nursing home services in any given year.  About half of these individuals consider the nursing home to be their primary place of residence.  Nursing home quality, however, has often been called into question.

Some experts believe pay-for-performance schemes will improve nursing home quality.  Today, I will review previous efforts to improve nursing home quality though P4P.

Briesacher et al. (2009)

A paper by Briesacher, Field, Baril and Gurwitz review P4P in nursing homes in a variety of states.   The authors note that “Approximately one-half of all Medicaid Programs currently operate some type of pay-for-performance program, and 85 percent have plans to do so within 5 years.”  This report consider nursing home P4P programs in: California, Colorado, Florida, Georgia, Illinois, Iowa, Kansas, Massachusetts, Minnesota, Ohio, Oklahoma, Texas and Utah.

Measures considered include:

  • Clinical Measures (e.g., pressure sores, use of physical restraints, pain management, quality of life, MDS indicators, state-developed CAHPS measures, care plans)
  • Satisfaction Levels (e.g., patient, family, employees)
  • Structural Measures (e.g., nursing retention, staff turnover, occupancy rates, special licensure, state survey compliance, staffing hours/ratios)
  • Cost (e.g., Medicaid utilization, administrative costs, efficiency)
  • Pressure sores,
  • Use of physical restraints,
  • Pain

Bonuses were paid depending on whether the nursing homes surpassed some threshold of these quality measures.  Some of the bonuses were paid as a flat rate ($3/day in Ohio and $0.50-$0.0 in Utah) and other used a percentage increase (up to 2.4% in Minnesota, 1%-3% increase in Iowa).  The highest bonus paid was 5% of per diem reimbursement where the lowest bonuses were $0.25.

“We found little empirical evidence that pay-for-performance programs increase the quality of care of residents or the efficiency of that care in nursing homes. However, the program set in San Diego did find benefits, and it used the strongest of all evaluation designs, a randomized control design.” The San Diego RCT randomized nursing homes into treatment and control groups and gave the treatment groups incentive payments for: (i) accepting patients needing the most functional assistance, (ii) improving patient functional status, and (iii) prompt discharges of patients who remained out of the facility for at least 90 days.

The authors also found that in most of these demonstrations, costs increased. The main reason for the cost increases was the bonus payments. The secondary reason for cost increases was the additional provider administrative burden to document and report the required quality measures.

Nursing Home Value-Based Purchasing Demonstration (NHVBP)

These two documents review the implementation of the Nursing Home Value-Based Purchasing (NHVBP) demonstration.  The Medicare NHVBP Demonstration relies on four basic types of performance measures.

  • Nursing home staffing [RN hours/resident day, licensed staff (RN/DON/LPN) hours/resident day, certified nurse aide (CNA) turnover percentage for nursing staff]
  • Rate of potentially avoidable hospitalizations (based on AHRQ conditions including congestive heart failure, COPD, urinary tract infection; to be measured per day for long-stay residents and to be peasure per stay for short-stay residents)
  • MDS-based resident outcome measures
    • For Long Stay patients: increase in share of residents who need help with ADLs, share of residents who are no longer able to move around their room, share of residents with pressure sores, share of residents with a catheter inserted and left in their bladder, share of residents in physical restraints
    • For Short stay patients: share of residents with improved ADL functioning, share of residents who improve status on mid-loss ADL functioning, share of residents who fail to improve bladder incontinence
  • Outcomes from state survey inspections (e.g., citations for substandard quality)

Abt, the demonstration evaluator, recommended that nursing homes should be rewarded for both attainment and improvement.

  • Attainment: “Homes with an overall performance score that is in the top 20 percent in terms of performance level should qualify for a performance payment. Homes in the top 10 percent would receive a larger performance payment than those in the next ten percent.”
  • Improvement: “Homes in the top 20 percent in terms of improvement should qualify for a performance payment in recognition of their improved performance, as long as their performance level was at least as high as the 40th percentile in the performance year.”

If a home qualifies for both an attainment and improvement score, the report suggests that the nursing homes only receive a single bonus payment.  To ensure budget neutrality, payments will be weighted based on the number of resident days for residents who are Medicare beneficiaries.  The size of the bonus pool depends on the cost savings that the nursing homes achieve.  Although this framework is feasible for demonstrations, one cannot institute this structure if a Nursing Home VBP system were put into practice as there would be no control group to compare savings to.

In calculating these measures scores, the report recommends using a percentile (relative) ranking system.  However, it can also use the relative ranking system but by cutting of the tails.  For instance, if you want to cut off the top 5 percentile scores, then one could allocate 100 points as: (X-X5)/(X95-X5) where Xi is the score at the ith percentile.  Hospitals below the 5th percentile would get a score of 0 and hospitals above the 95th percentile would get a score of 100.

One can make bonus payments based on three domains:

  • A single composite score
  • Score per domain (e.g., staffing, avoidable hospitalizations, MDS outcome measures, and inspections).
  • Score for individual measure

The report suggests that Medicare institute the P4P payment based on a single composite score.   For the composite score, the authors recommend that the staffing domain make up 30% of the score, the hospitalization domain make up 30% of the score, the resident outcomes make up 20% of the score, and survey deficiencies make up 20% of the score.

Nursing homes in the top 20 percent in terms of attainment will receive a bonus.  Homes in the top 20 percent in terms of improvement that are also above the 40th percentile in terms of attainment will receive a bonus as well.  As additional bonus payment will be given to nursing homes in the top 10 percentiles in terms of improvement or attainment.

The report also calls for performance payments should to “….be weighted based on nursing home resident census during the period covered by the performance payment.”

Nursing Home Compare

The Nursing Home Compare is CMS’s effort provide consumers with information on nursing home quality. Visitors to the website can evaluate nearby nursing homes based on the following criteria: health inspection results, nursing home staff data, quality measures. Each of these nursing homes receives a rating for each these criteria ranging from 1 to 5 stars. In addition, the site gives information on whether the nursing home accepts Medicare and/or Medicaid coverage, the number of beds in the facility, and the type of ownership.


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