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CMS Aims to Launch Nursing Home 'P4P' Demo Soon, Kuhn Says

MARCH 24, 2006 -- The Centers for Medicare and Medicaid Services hopes later this year to invite state agencies to participate in a pilot project that would pay nursing homes more if they provide better quality of care.

Homes in the pilot could pile up "quality points" for reducing bedsores, giving good care to heart failure patients, and reducing staff turnover, among other activities. Those with the most points would earn higher payments, as would lesser performers that improved their point totals from year to year.

Both groups would get equally large bonus payments under tentative plans for the demonstration project. "In many cases the better homes are going to continue to be good. We actually think we would get more bang for the buck by making mediocre facilities better," said Mark Wynn, director of the CMS Division of Payment Policy Demonstrations.

Nursing homes have expressed concern about some of the quality measures CMS plans to use in the demo, however.

The "Nursing Home Quality-Based Purchasing Demonstration" is part of a broad effort at CMS to eliminate wasteful Medicare spending and improve quality of care through "P4P," or payment-for-performance systems. Key lawmakers in Congress also have expressed support for the P4P approach.

Even so, the timing of the nursing home demo is uncertain, as is funding for the project. "We don't have a budget right now, but we're trying to line one up," Wynn said in an interview Friday.

In remarks delivered Thursday at a forum on nursing home quality, Herb Kuhn, director of the CMS Center for Medicare Management, said facilities in "four or five" states would be asked to participate. Tentative plans call for 50 facilities per state to take part. CMS will choose the participating states after reviewing applications from state Medicaid programs, according to Wynn.

Wynn estimated the cost of operating the three-year demo at $3 million. Bonus payments themselves would not come out of those funds, and the size of the bonus payment pool hasn't been determined, he said. Nevertheless, Wynn said he expects nursing facilities to be highly interested in the pilot program because of the possibility of higher payment and the absence of any payment deductions for lower-quality care. "There's no downside to it," he said. "We're not going to take money away from anyone."

Demo Design Under Discussion
Wynn described several tentative decisions that have been made about the design of the demo while noting that it is still subject to change. Bonus payments would be made to the top 20 percent in terms of point scores. Another 20 percent of facilities would receive payments for quality improvement.

CMS plans to assign quality points in four categories:

  • Staffing: Homes with higher ratios of nurses to patients would get higher quality scores, as would those with less staff turnover. "Nursing homes with lower turnover provide better continuity of care and in many cases better care for the patients," said Wynn.
  • Hospitalization: Homes that do a good job of providing preventive care that keeps patients out of the hospital would receive higher quality scores. Wynn noted a home might do a particularly good job of providing care that keeps congestive heart failure patients out of the hospital, for example, generating considerable savings for the Medicare program. In fact, savings from preventing hospitalizations may be used in the pilot project to help fund bonus payments, he said.
  • Other measures: CMS evaluates quality of care from the "Minimum Data Set"(MDS) nursing homes must provide to the agency. Performance on a variety of MDS measures of quality are now posted on the CMS Nursing Home Compare Web site. The pilot will use a number of those measures.
  • Inspection results: Points also would be assigned based on how well nursing homes perform in state inspections.

For example, Wynn said, CMS will include measures of the percentage of nursing home residents who have bed sores; the percentage who are tied to their beds to keep them from wandering; the percentage whose ability to move around on their own deteriorates; and the percentage who need growing assistance with "activities of daily living," such as bathing, eating, and getting dressed.

Nursing homes say the MDS measures are useful as rough indicators of quality of care problems. But better "risk adjustment" of those measures is needed before comparative rankings of homes are made for payment purposes, said Barbara Manard, a vice president at the American Association of Homes and Services for the Aging.

Some homes that don't perform as well on MDS scores may actually provide superior care not reflected by the measures because they have a sicker patient population, the AAHSA official noted. She added that an Institute of Medicine study last year found that the MDS measures aren't yet suitable for performance-based payment.

Either risk adjustment methods should be improved to account for those differences, or alternative measures should be given greater weight, Manard said. She praised the staffing and hospitalization measures as more valid indicators of quality of care.

Another nursing home lobby, the American Health Care Association, expressed dissatisfaction with minimum staffing levels as a measure, however, noting that there is a shortage of nurses in the U.S. Facilities will have to incur added staffing costs with no certainty that their payments will increase if their performance improves, AHCA said.

Although much of nursing home care is funded by the Medicaid program, Medicare aims to play a role in improving nursing home quality because many of its beneficiaries are in such facilities, Wynn said. Higher payments for better quality would benefit all nursing home residents, including those not covered by Medicare, he said.

Nursing homes already report data on the quality of their care, but P4P in the nursing home sector apparently will arrive more slowly than for acute care hospitals. In the case of hospitals, CMS already has completed a pilot program that found P4P improved quality of care. Wynn said the planned three-year demo will help CMS determine how well P4P works for nursing homes before switching widely to such a system.

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