Nursing Home Pay-for- Performance

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1 Nursing Home Pay-for- Performance David C. Grabowski, PhD Harvard Medical School The opinions presented here are those of the author and do not necessarily represent the views or policies of the Centers for Medicare & Medicaid Services

2 Outline for Talk NH P4P Background Previous initiatives CMS Demonstration Some initial observations

3 LTC Quality Poor quality of care has been documented for decades, especially in NH sector

4 Potential Reasons for Poor Quality Inadequate public reimbursement Regulations (e.g., CON, bed moratoria) Incomplete information All of these factors distort market competition

5 Pay-for-Performance Simple idea: reward providers for good outcomes Create a market for good quality In theory, P4P could potentially improve quality while maintaining costs However, P4P generally not found to be effective in other health care settings (Rosenthal and Frank 2006)

6 Unintended Consequences Gaming of incentives (e.g., miscoding; selection of healthier patients) Compensation based on available measures distorts effort away from unmeasured objectives ( multitasking problem) Rewards often not large enough to change behavior Often reward good performers at baseline May widen gulf between haves and have nots

7 P4P in Nursing Homes San Diego NH experiment in late 1970s Incentive payments associated with higher probability of discharge to home or lower-level NH, and lower probability of hospitalization or death (Weissert et al. 1983; Norton 1992) 12 States have tried some form of P4P Active: GA, IA, KS, MN, OH, OK, UT Terminated: CO, FL, IL, MA, TX Mostly short-lived, varied considerably in performance measures and pay incentives, and evaluations have been rare (Briesacher et al. 2009)

8 Nursing Home Value-Based Purchasing Demonstration Three-year voluntary demonstration beginning summer 2009 Demonstration states: Arizona, New York, Wisconsin Mississippi no longer involved Randomized design Goal was to recruit 100 facilities per state 50 facilities sorted into treatment and 50 into the control group

9 Performance Measures and Scoring Rules Staffing: 30 points 10 points for RN staffing, 5 points for LPN staffing; 5 points for CNA staffing, 10 points for turnover Potentially avoidable hospitalizations: 30 points CHF, respiratory infection, electrolyte imbalance, sepsis, UTI, anemia (long-stay only) Source of potential Medicare savings Survey deficiencies: 20 points MDS-based resident outcomes: 20 points 5 long-stay and 3 short-stay QMs

10 Budget Neutrality The size of the payment pool will be determined based on the estimated Medicare savings achieved by demonstration homes in each state If there are no statewide savings, then there will be no incentive payments, regardless of a given NH s performance

11 Performance Payments NHs in top 20% in terms of overall performance and improvement qualify for incentive payment Top 10% receive higher payout High hospitalization NHs ineligible for payout, ensuring that qualifying NHs contribute to savings Rules for determining size of payment pool complicated 0-2.3% of Medicare savings goes to CMS 2.3-5%, 80% to fund performance payments, 20% to CMS >5% goes to CMS

12 Initial Observations External validity States Facilities Budget neutrality restriction

13 External Validity: States Long-stay hospitalizations (state rank) Short-stay rehospitalizations (state rank) Arizona 8.5% (47) 22.9% (11) Mississippi 29.9% (2) 21.1% (22) New York 20.6% (15) 22.5% (14) Wisconsin 13.8% (37) 17.7 (34) U.S. 19.% 21.2% Source: 2006 data, CMWF Scorecard, Brown University

14 External Validity: Facilities Are certain types of NHs more likely to select into demo? Examine observables Qualitative interviews We don t know the answer yet, but budget neutrality restriction may influence the riskreward tradeoff under P4P

15 Facility s Decision Function Administrative costs (submit payroll data) Cost of improving performance -vs- Size of potential payout Likelihood of ranking in top 20% Time preference Likelihood of aggregate costs savings (treatment vs control) Nursing home don t like risk!!!

16 NHs Don t Like Risk!!! We support pay-for-performance, as long performance is defined by staffing and other inputs we can control. WA State NH association representative, Joint Task Force on Long Term Care Residential Facility Payment Systems, Washington State Legislature, Olympia, WA, October 16, 2007.

17 Concluding Thoughts CMS has designed a strong research platform to evaluate nursing home P4P Follows hospital and home health demos However, given constraints, this is ultimately a test of CMS NHVBP rather than NH P4P more generally Budget neutrality unfortunate, but unavoidable In an ideal world, CMS could put new $$$ into the demo, but that is not a political reality Stay tuned for evaluation results

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