Medicaid Nursing Home Nursing Homes P4P Quality

The Effect of Medicaid P4P on Nursing Home Quality

Over 10 million Americans need long-term services and supports to assist them in life’s daily activities.  Of these, 1.6 million reside in a nursing home. Nursing home care, however, is expensive ($74,800 per year) and and quality is highly variable.

To improve the quality of care, many states have begun adopting pay-for-performance (P4P) programs for nursing homes.

Between 2002 and 2009, eight states adopted Medicaid-sponsored P4P programs in nursing homes all of which primarily targeted quality of care for long-stay (or chronic care) residents…programs have been previously described (Werner et al. 2010). Briefly, most states use a payment model based on a point system that is translated into per diem add-ons. For each measure included in the payment model, each nursing home is evaluated and earns points based on either its ranking compared with other nursing homes in the state or, in one state, whether it has achieved a target level of performance. The earned points are summed across all measures and translated into a per diem add-on for all Medicaid resident days, where nursing homes with more points receive higher add-ons. The total possible bonus amount varied across states from an add-on valued at about half a percent of the per diem rate to over 5 percent with bonuses in most states ranging
between 3 and 4 percent of the per diem rates.

Consumer response to publicly-reported nursing home quality measures on Nursing Home Compare, however, has been limited.

Are nursing homes themselves responding to the state P4P initiatives? A paper by Werner, Konetzka, and Polsy examines this question. Because the different states implemented the P4P programs at different times, the authors are able to use a difference-in-differences approach to examine how the P4P programs affected quality.


The authors find the following:

Quality improvement under P4P was inconsistent. While three clinical quality measures (the percent of residents being physically restrained, in moderate to severe pain, and developed pressure sores) improved with the implementation of P4P in states with P4P compared with states without P4P, other targeted quality measures either did not change or worsened. Of the two structural measures of quality that were tied to payment (total number of deficiencies and nurse staffing) deficiency rates worsened slightly under P4P while staffing levels did not change.

The authors caution that hopes for P4P to produce dramatic improvement in nursing home quality should be tempered.

Methodological Details

The authors limit the analysis to long-stay residents, defining a long-stay resident as those with at least one quarterly or annual assessment in addition to an admission (or prior quarterly/annual) assessment. This approach ensures that the resident has been in the nursing home for at least 90 days. Other methodological details are described as follows:

To avoid overweighting sicker residents who may have more frequent assessments, we limit each resident to only one assessment per quarter in our final dataset. Following conventions set out by the CMS for measuring nursing home quality (Nursing Home Quality Initiative 2004), if a resident has more than one assessment per quarter, we choose the most recent assessment in that quarter. Finally, also following CMS conventions, we do not include admission assessments, as patient outcomes on admission cannot be attributed to the admitting nursing home’s quality of care.

To risk adjust, the authors use we the same resident-level characteristics defined by CMS technical specifications for each quality measure (Morris et al. 2003; Nursing Home Quality Initiative 2004). In addition, they authors also include age, gender, and race as additional covariates.


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