Academic journal article Health Care Financing Review

Pay-for-Performance in Nursing Homes

Academic journal article Health Care Financing Review

Pay-for-Performance in Nursing Homes

Article excerpt


More than 3 million frail and disabled individuals will rely on services provided by a nursing home at some point during the year, and among them 1.5 million will stay long enough to consider the nursing home their main residence (Doshi, Shaffer, and Briesacher, 2005). These individuals, their families, and their friends count on nursing homes to provide care that is of high quality. However, as of 2006, one in five nursing homes nationwide was cited for serious deficiencies--deficiencies that caused actual harm or placed residents in immediate jeopardy (Centers for Medicare & Medicaid Services 2006; U.S. Government Accountability Office, 2007).

One strategy for improving the quality of care in nursing homes is to link health care spending to quality and efficiency through pay-for-performance programs. Pay-for performance is a reimbursement approach designed to reward health care providers for achieving high levels of performance, or improvements in performance. This approach is in contrast to fee schedules of fiat rates per service, where reimbursement is the highest when the most services are rendered, regardless of improved patient outcomes. In 2001, the Institute of Medicine identified payment systems based on only the quantity of care provided as a barrier to quality improvement and recommended that health care purchasers adopt reimbursement policies linked to quality improvement (Committee on Quality of Health Care in America and Institute of Medicine, 2001). 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 (Kuhmerker and Hartman, 2007). Pay-for-performance programs in the nursing home setting have been rare; two recent surveys identified only four active programs (Georgia, Iowa, Vermont, and Utah) (White et al., 2006; Kuhmerker and Hartman, 2007). However, this will soon be changing as CMS, the largest purchaser of nursing home services (about $64 billion per year), will be sponsoring a pay-for-performance initiative through the Nursing Home Value-Based Purchasing Demonstration (Centers for Medicare & Medicaid, 2008, 2006). Beginning in the summer of 2009, the pay-for-performance demonstration will include as many as 50 nursing homes per State in 4 host States.

Information on pay-for-performance programs in the nursing home setting is lacking, both on details of the programs as well as evaluations of any impacts. Research conducted in other health care settings find inconsistent improvements with pay-for-performance programs, both in terms of process measures of care (e.g., screening rates) and patient outcomes (Rosenthal and Frank, 2005; Petersen et al., 2006; FeltLisk, Gimm, and Petersen, 2007; Gilmore et al., 2007). For example, a recent analysis of pay-for-performance in the acute care setting found no significant differences in the quality of care or outcomes of patients with myocardial infarctions (Rosenthal and Frank 2005; Glickman et al., 2007). The lack of significant quality improvements in these different settings raises questions about the potential for similarly lackluster results in nursing homes. The objective of this study was to review the empirical literature to characterize current and former pay-for-performance programs in the nursing home setting and to compare the performance measures, pay incentives, and any evaluations of the impact of these programs.


Conceptual Framework

Our conceptual framework for this review is an adaptation of the work by Rosenthal and Frank (2006). Within that framework, improving quality of care is addressed through a payment system that makes increasing quality in the best financial interest of the provider of care. However, a successful payment system requires good information to create a reward that is commensurate with the costs to the provider of increasing quality. …

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