CMS Announces Details Regarding Pay-For-Performance Demonstration for Nursing Homes

April 20, 2009

The Centers for Medicare and Medicaid Services (CMS) has recently announced a demonstration project to explore a pay-for-performance program for nursing homes. The Nursing Home Value-Based Purchasing Demonstration (NHVBPD) is expected to begin in Summer of 2009 and continue through June 2012. The demonstration project will be limited to nursing homes located in four states: Arizona, Mississippi, New York, and Wisconsin. Nursing homes in these states have already been sent letters asking them to volunteer to be a part of the demonstration program.

The announcement of the NHVBPD is the continuation of a larger trend within CMS and Medicare payment policy circles to attempt to identify effective ways to improve quality and reduce healthcare costs through a combined “carrot and stick” approach of providing incentive payments for superior performance in a budget-neutral manner. Similar programs are being considered for acute care hospitals as well.

The NHVBPD is designed to improve the quality of care furnished to all Medicare beneficiaries in nursing homes. Improvements in quality of care are encouraged by assessing nursing home performance based upon select performance measures and making annual payment awards to those nursing homes that achieve the best performance or the most improvement based upon the measures included.

CMS has decided to include the following performance measures in the NHVBPD:

  • Staffing Performance Measures. In an effort to eliminate reductions in the quality of care caused by low staffing levels and high nurse staffing turnover, various nurse staffing measures will be calculated from payroll data submitted by participants and compared against staffing measures standards. These measures include registered nurse hours per resident day, total licensed nursing hours per resident day, certified nurse aide hours per resident day, and nursing staff turnover rates. These measures will be adjusted for case mix differences among nursing homes.
  • Potentially Avoidable Hospitalizations. The program will include measures for hospitalizations of nursing home residents that are potentially avoidable. Included in “potentially avoidable” hospitalizations are hospitalizations with any of the following diagnoses: congestive heart failure, respiratory infection, electrolyte imbalance, sepsis, and urinary tract infection.
  • Minimum Data Set (“MDS”)-Based Quality Measures. MDS-based quality measures are included to align payment with achievement of better outcomes for nursing home residents. A subset of MDS-based quality measures covering a broad range of functioning and health status in multiple care areas has been selected. These include use of five of the quality measures posted on Nursing Home Compare for chronic care (long-stay) residents and separate quality measures for post-acute care (short-stay) residents.
  • State Survey Inspections. The outcomes from state survey inspections will be used as both a screening and performance measure. As a screening measure, facilities with a sub-standard quality of care deficiency will be ineligible for an incentive payment for the year. As a performance measure, deficiencies will be assigned values based upon scope and severity similar to the system used in the CMS 5-Star Rating System.

Annual performance payments will be based upon the overall performance score rather than scores on the individual performance measures or categories of measures included. The size of the performance payments will depend upon the Medicare savings generated by the participants in each state.

Nursing homes in the top 20% in terms of overall performance will qualify for an incentive payment as will those nursing homes in the top 20% in terms of improvement relative to the baseline period. Any nursing home with hospitalization rates above the comparison group median or significantly higher than the base year rate will be ineligible for a performance payment. Nursing homes with overall performance below the 40th percentile will also be ineligible for a performance payment.

The NHVBPD is another in an interesting line of developments involving potentially radical changes to payment methodologies for nursing homes under government-funded programs. If you have any questions, or if you would like to learn more about the NHVBPD program or other matters affecting payment for nursing home services, please contact a member of our Senior Care group. We will be monitoring the NHVBPD as more details become available and will apprise you of any significant developments through our web and e-news service.