In our review, we found that few pay-for-performance programs have occurred in the nursing home setting since 1990, and even fewer have lasted more than a few years. Among the seven programs that are currently operational, three were initiated in 2007 and the oldest program is in its sixth year of operation.
We found little empirical evidence that pay-for-performance programs increase the quality of care of residents or the efficiency of that care in nursing homes. However, the program set in San Diego did find benefits, and it used the strongest of all evaluation designs, a randomized control design. This provocative finding deserves a more current replication. The disappointing results from the other programs are difficult to explain but may be related to barriers specific to this setting of care. According to our conceptual framework, the incentive payment must be sufficient to reward providers after accounting for the costs to improve care. For nursing homes already strained by high turnover among staff and administrators or ownership profits, the costs of improving care, such as implementing health information technology may far exceed the incentive payment.
Our review also revealed that nearly all of the programs were developed independently so there was modest agreement across the design elements of the programs and no clear state-of-the art trends. In most cases the performance measures are derived from existing data collection efforts related to State and Federal certification surveys. In addition to problems with accuracy and timeliness, these sources limit measurement options to a few components of quality with clear relationships to resident outcomes. Important quality issues such as the quality of life of residents and the satisfaction of residents and their families with nursing home care require additional data collection, increasing the cost of these programs.
Several limitations of this review should be noted. Pay-for-performance is an evolving concept, so standard terminology was sometimes lacking and descriptions of current activity were limited. For instance, the terms value-based purchasing and pay-for-performance were treated as synonymous, while quality recognition programs were handled on a case-by-case basis. Documentation of these programs was very limited. For instance, in the case of Utah, we could identify that a program had been initiated in 2004 but could find no subsequent information on the performance. In fact, this review raised more questions than answers. We could identify that many programs were short-lived but could rarely find the reasons for the terminations. Lastly, any assessment of current pay-for-performance activity will quickly become outdated. Our assessment can serve only as snapshot of the historical trends and evidence base for these programs before CMS invites participation in its nursing home demonstration.
Using financial incentives to encourage quality of healthcare is an increasingly popular approach to improving quality. That most of these programs in nursing homes have been terminated after a few years of operation sends an important warning that these approaches must be very carefully designed, although the reasons for these terminations are not clear and may be related more to lack of political viability rather than practical viability. At least one program had to be significantly scaled back in response to pressure from the State’s nursing home industry, an important constituency of State lawmakers (Kane, Arling, and Mueller, 2007
). With the current lack of evidence to support the design and implementation of such programs, payers considering pay-for-performance in this setting should carefully consider the specific areas of performance and quality of most concern, review the capacity of the target nursing homes to actually accomplish the quality goals, involve the local nursing home industry in the design of the program from the beginning, and track all of the potential intended and unintended consequences of the program.
What can policymakers learn from this review, especially in terms of assessing the CMS Nursing Home Value-Based Purchasing Demonstration (NHVBP)? First, rigorous evaluations of the impact of payfor- performance are almost nonexistent in the nursing home setting, yet they are critical for understanding the implications of this policy. It is reassuring to see that the NHVBP will employ an experimental design with randomized assignment of participating nursing homes into treatment and control groups and has contracted for an independent evaluation. Second, improvement in residents’ outcomes and costs savings have been documented in only one program (in San Diego in the 1980s). Yet, the NHVBP demonstration requires cost savings expected to result from decreases in hospitalizations and skilled nursing facility stays and other savings, otherwise incentive payments are not awarded. The design of this payment system places a considerable burden on the provider to increase quality that ensures Medicare savings, and this is a burden unlike that of the other programs in our review. Third, the state of measuring quality in nursing homes has evolved to include informative domains such as resident quality of life and consumer satisfaction. The CMS demonstration is initially focused on the traditional measures of staffing (levels and stability), MDS based-quality measures, survey deficiencies, and inappropriate hospitalizations. The one exception in this list is the measure of inappropriate hospitalizations, although the validity and reliability of this measure in the nursing home setting is yet unclear. It should be noted, though, that resident satisfaction has been listed as a potential measure for future years of the demonstration (Centers for Medicare & Medicaid 2008
). Lastly, the small number of prior programs, many of which were terminated, suggests that potentially serious barriers exist to implementing and sustaining pay-for-performance programs in this setting. It would be beneficial if the CMS demonstration would include a thoughtful assessment of these barriers, particularly which factors would be important to maintaining a pay-for-performance program after the demonstration is concluded.