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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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7

Payment and Financing

Ideally, payment and financing for nursing home care and services would be designed to support access to services, a high quality of care, equity, and efficiency. The current system in the United States falls short in achieving those goals, however. This chapter of the report reviews the current payment and financing and framework for nursing home care and services and identifies high-priority challenges that the nation needs to address in order to improve the quality of care in nursing homes.

PAYING FOR NURSING HOME CARE

The United States devotes a significant share of national health expenditures to nursing home care. Spending on nursing homes1 reached $172.7 billion in 2019, representing 5 percent of total health expenditures (CMS, 2019a; Martin et al., 2020). Three payers account for the majority of funds that go to nursing home services: the federal Medicare program, the federal–state Medicaid program, and private payers. In 2020, Medicaid paid for the care of 62 percent of all nursing home residents, Medicare for 12 percent of all nursing home residents, and private payers for the remaining 26 percent (KFF, 2020).2

Nursing homes serve two broad groups of residents: long-stay residents and those individuals who are discharged to a nursing home to receive postacute care after a hospital stay. Within each group, there is significant diversity among the populations. Medicaid is the dominant payer for long-stay

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1 Total expenditures on care provided in nursing homes and continuing care retirement communities.

2 Of the total number of nursing homes, 97.5 percent are Medicare certified, and 95.2 percent are Medicaid certified (Harris-Kojetin et al., 2019).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
×

residents, who typically are individuals with chronic illness and who have an average length of stay in a nursing home setting of approximately 2 years. Care for this patient population consists largely of providing assistance with activities of daily living such as bathing, dressing, eating, toileting, and walking (see Chapter 4). To qualify for Medicaid-funded nursing home care, an individual must meet state-established medical eligibility criteria and satisfy income and asset thresholds (Sollitto, 2021).

Medicare is the dominant payer for post-acute care nursing home patients, also referred to as short-stay residents, who have an average length of stay of approximately 25 days (Werner et al., 2013). Medicare-certified nursing homes also provide skilled, rehabilitative care to individuals following an acute-care hospital stay (Harris-Kojetin et al., 2019). The goal of this care is to help people achieve and maintain their highest level of functioning (see Chapter 4). To qualify for services, a Medicare beneficiary covered by the traditional fee-for-service (FFS) Medicare program3 must require daily skilled nursing or rehabilitative therapy services, generally within 30 days of an inpatient hospital stay of at least 3 days in length as an inpatient4 and must be admitted to the nursing home as a result of a condition related to that hospital stay (CMS, 2019b).

An individual may transition between post-acute and long-stay settings over time. Consider, for example, a community-dwelling individual who is hospitalized and then discharged to a nursing home. In some cases, the nursing home will discharge the individual back to the community, while at other times the person will remain as a long-stay resident at the same facility. Similarly, a long-stay nursing home resident who is hospitalized may then return to the nursing home as a post-acute patient before transitioning back to a long-stay setting. Many of these individuals who transition across settings are beneficiaries of both Medicare and Medicaid. For these people, known as dually eligible individuals, Medicare pays for the hospital and short-stay nursing home care, and Medicaid pays for long-stay nursing home care.

This fragmented payment system, with Medicare paying for short-term post-acute care, and Medicaid paying for long-term nursing home care, often creates perverse incentives across the settings of care with significant implications for nursing home care and financing (Grabowski, 2007). For example, the Medicaid program has less incentive to prevent Medicare-financed hospitalizations, while the Medicare program has less incentive to prevent newly admitted nursing home patients from transitioning to long-stay Medicaid status.

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3 This refers to individuals covered under the traditional fee-for-service Medicare program, in contrast to those enrolled in Medicare Advantage plans.

4 This requirement was waived during the COVID-19 pandemic.

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Medicare Coverage and Payment

Although Medicare pays for a relatively small percentage of those receiving nursing home care, it is an important payer of health care services for nursing home residents. On average, Medicare paid for only 12 percent of the total bed-days in nursing homes nationwide, but accounted for nearly 27 percent of overall revenues in 2019 (CRS, 2020; KFF, 2020). Medicare is considered a generous payer of post-acute care nursing home services. Medicare margins, or the amount Medicare pays relative to the cost to treat beneficiaries in skilled nursing facilities (SNFs), have averaged more than 14 percent over the past 11 years. The Medicare Payment Advisory Commission (MedPAC) has called for better alignment of Medicare payments with the cost of SNF care (MedPAC, 2020).

Under traditional FFS Medicare, Part A covers inpatient hospital care, SNF care, some home health care, and as discussed further below, hospice care. Medicare Part B covers physician visits, outpatient services, preventive services, and some home health services (KFF, 2019). Medicare covers all necessary services for post-acute care patients, including room and board, nursing care, and ancillary services such as drugs, laboratory tests, and physical therapy. Medicare covers up to 100 days of nursing home care for an episode of acute illness and recovery. For the first 20 days of a benefit period, Medicare pays 100 percent of the cost of care. From day 21 on, most patients become responsible for a substantial daily copayment. For fiscal year 2021, the copayment was $185.50 per day (MedPAC, 2021a). Medicaid, for dually eligible individuals, or Medicare Supplemental insurance (Medigap), for those individuals who have purchased that coverage, typically cover that copayment (CMS, 2021a).

The Medicare Advantage (MA) program, also known as Part C, provides an alternative to traditional Medicare. Through the MA program, discussed further below, Medicare beneficiaries can sign up for coverage through a health maintenance organization or preferred provider organization and receive coverage for Medicare Part A and Part B benefits, as well as Part D (outpatient prescription drug benefits) (KFF, 2019). More than half (51 percent) of Medicare beneficiaries had traditional Medicare along with some type of supplemental coverage including Medigap, employer-sponsored insurance, and Medicaid, while 39 percent were enrolled in a Medicare Advantage plan as of 2018 (Koma et al., 2021).

Patient-Driven Payment Model

In October 2019, Medicare implemented a new payment system for nursing home care known as the patient-driven payment model (PDPM). This new payment system replaced the case-mix model, which was based

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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on resource utilization groups5 that heavily weighted payments according to the volume of therapy use (e.g., number of weekly therapy minutes provided to residents). The PDPM shifts the emphasis away from volume toward value, and takes into account factors related to the patient’s underlying complexity of condition and clinical needs. This change is designed to be budget neutral and to align payment incentives with quality incentives (McGarry et al., 2021).

The previous payment system had long been criticized for promoting rehabilitation therapy services to nursing home residents that were often deemed excessive and unnecessary. The share of days classified as rehabilitation increased from 78 percent in 2002 to 95 percent in 2018 (MedPAC, 2020). The Department of Justice, for its part, has investigated and brought cases against nursing homes for improper billing for medically unnecessary and excessive therapy services.6

The implementation of the new payment model coincided with the beginning of the COVID-19 pandemic. Thus, it will take some time to understand the overall impact of the new payment model. However, early research suggests that the shift to PDPM is associated with reduced therapy staffing (McGarry et al., 2021) and services (Rahman et al., 2022). The Medicare Payment Advisory Commission has found nursing homes have continued to make double-digit Medicare margins under the PDPM (MedPAC, 2020). The COVID-19 pandemic, for its part, led to a significant reduction in postacute care in nursing homes. One early study showed, for example, that from 2019 to 2020, admissions to nursing homes for post-acute care declined 51 percent, resulting in a 55 percent decline in spending on post-acute care (Werner and Bressman, 2021). Further research will determine whether the reduction in post-acute care admissions is a short-term response to the pandemic or an indication of a longer-term change in post-acute care utilization.

Medicare’s Hospice Benefit

As discussed in Chapter 4, Medicare provides a separate hospice benefit for beneficiaries who are expected to live 6 months or less. It is important to note Medicare will not pay for nursing home care and hospice care in a nursing home simultaneously (CMS, 2022a; Fausto, 2018; Span, 2012). Medicare pays hospice agencies a per-person daily rate to provide a range of palliative care services that reflect residents’ preferences for end-of-life care as specified in their care plans. Medicare first introduced the hospice benefit in 1983, and the benefit’s use and associated program spending has grown

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5 Resource utilization groups classify nursing home residents according to their clinical and functional statuses as identified from Minimum Data Set data supplied by the nursing home.

6 See https://www.foley.com/en/insights/publications/2020/03/skilled-nursing-facilities-target-area-doj-fca (accessed February 14, 2022).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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steadily; Medicare hospice expenditures rose from less than $3 billion in 2000 to nearly $21 billion in 2019. Moreover, the share of Medicare beneficiaries who die in hospice care has increased from 22 percent in 2000 to more than 50 percent in 2019 (MedPAC, 2021a; Sheingold et al., 2015). Medicare’s hospice benefit paid for services provided to more than 1.6 million beneficiaries in 2019 (MedPAC, 2021a).

Medicare’s daily per-beneficiary rate is paid to hospice agencies irrespective of the amount of services provided to the patient on a given day. Hospice agencies may find caring for patients in nursing home settings more profitable than caring for patients in home settings because of the efficiencies of treating patients in a centralized location, the overlap in responsibilities between the hospice and the nursing home, and the ability of nursing homes to serve as referral sources for new patients (MedPAC, 2020; OIG, 2018).

The Medicare Payment Advisory Commission and the Office of the Inspector General have expressed concern that hospice providers may be selectively enrolling nursing home residents with longer hospice stays and less complex care needs, thereby generating higher profit margins (MedPAC, 2008; OIG, 2011; Sheingold et al., 2015; Teno and Higginson, 2018; Wachterman et al., 2011). One study found that the growth in hospice care for nursing home residents was associated with less aggressive care near death. At the same time, the study revealed that increased hospice care was associated with an overall increase in Medicare expenditures (Gozalo et al., 2015). To address these concerns, the Center for Medicare and Medicaid Innovation launched an initiative to include the Part A Hospice benefit through the Value-Based Insurance Design model, which is discussed further below.7

Medicaid Coverage and Payment

Medicaid is the federal–state program for low-income individuals who meet the program’s eligibility requirements; Medicaid provides coverage to 20 percent of the U.S. population (KFF, 2019). Medicaid covers a range of long-term services and supports (LTSS) including home- and community-based services (HCBS) that enable individuals to live in community settings as well as institutional care provided in nursing home settings. The overall share of funds going to HCBS as compared to nursing homes has shifted significantly over the past two decades. Although HCBS spending varies considerably across states, slightly more than 40 percent of Medicaid LTSS spending went to nursing homes in fiscal year (FY) 2016, compared to 20 years ago when nursing homes received more than 80 percent of Medicaid’s LTSS spending (Rudowitz et al., 2019). Despite the increased funding for

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7 See https://innovation.cms.gov/innovation-models/vbid-hospice-benefit-overview (accessed February 2, 2020).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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HCBS, nearly 200,000 Medicaid beneficiaries are on waiting lists for home-based care services (KFF, 2018).

Medicaid pays a fixed daily rate to cover the cost of care, room, meals, and medical supplies (ACA, 2021). States are guaranteed federal matching funds for services provided to Medicaid-eligible individuals. The federal match rate is determined by a formula and varies by state, ranging from a match of at least 50 percent, to a high of 75 percent in poorer states (Rudowitz et al., 2019).

Each state’s Medicaid program uses a variety of methods to set payment rates for Medicaid nursing home residents (Grabowski et al., 2004a; MACPAC, 2019). In general, nursing homes must submit cost reports which the state Medicaid programs use to establish rates which fall into two broad categories:

  • Facility-specific or cost-based: a nursing home’s rate is based on its reported per diem costs subject to certain limitations, and
  • Facility-independent or price: the same rate is paid to a group of homes based on costs reported by homes with similar characteristics subject to certain limitations.

As an incentive for nursing homes to control costs, states will set rates prospectively using prior year (or years) cost reports. States typically group costs from the cost reports into a series of cost centers including direct care, indirect care, administration, and capital. Each cost center has an associated cap or spending limit. The incentive to control costs increases when states do not update rates using more recent cost reports but instead adjust rates over time for inflation using an exogenous measure of price changes. Most states allow bed-hold payments when a resident takes a short leave of absence from the facility for an inpatient hospital stay or a therapeutic leave (visit with family). The majority of states adjust their Medicaid payment rates for case mix to ensure access for residents with more extensive care needs. These adjustments may be for individual residents or may be tied to the average case mix of a nursing home (CMS, 2021b). As discussed below, some states also use incentive-based Medicaid payments for high-performing facilities.

Medicaid Spend Down

To qualify for Medicaid coverage for nursing home care, individuals must meet both income and asset thresholds. The asset standard is often the key barrier to qualifying for Medicaid, because individuals can treat medical expenditures against the income standard in most states. Individuals can have no more than $2,000 in assets if single and no more than $3,000 if married (Johnson et al., 2021).8 For married individuals, there

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8 Income rules for Medicaid eligibility vary by state.

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
×

are also spousal impoverishment provisions that protect a certain amount of the couple’s combined resources for the spouse living in the community in determining Medicaid eligibility. Some assets are also set aside and not counted when determining Medicaid nursing home eligibility such as the value of the home (up to state-set limit), one vehicle, burial space, and life insurance policies (up to a limit). If individuals have assets above the limit, they must “spend down” their assets until they qualify for Medicaid (Johnson et al., 2021).

Long-term nursing home use has been identified as a key predictor of transition into Medicaid as many older adults face significant unplanned costs of long-term care—particularly as even a semi-private room in a nursing home can cost more than $100,000 per year, far exceeding the median income and savings of older adults (Jacobson et al., 2017; Keohane et al., 2017; Wiener et al., 2013) (see Box 7-1 below).

Private Payers

A small percentage of people pay privately for nursing home services. Private-pay residents’ payments are market based and reflect rates set by the nursing home. Unlike other health services for which insurers influence payment rates, long-term care insurance plays almost no role in determining private-pay nursing home rates. Only 11 percent of people over age 65 have long-term care insurance, and the policies almost always provide a specified daily dollar benefit (Johnson, 2016; McGarry and Grabowski, 2019a). A private-pay resident in a nursing home would be responsible to pay any difference between the specified benefit and the agreed-upon nursing home charge.

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
×

VARIABILITY BETWEEN MEDICARE AND MEDICAID PAYMENTS

The adequacy of Medicaid payment rates has been a perennial issue. A consensus exists across a broad range of stakeholders—including providers (AHCA, 2021), financial analysts (Rutledge et al., 2019), government (MedPAC, 2020), and researchers (Troyer, 2002)—that because of higher Medicare payment rates, Medicare short-stay nursing home patients generate higher profit margins than Medicaid residents (Grabowski, 2007). For its part, the MedPAC has called attention to double-digit Medicare margins in nursing homes for many years (MedPAC, 2020).

Medicaid rates may be deemed inadequate because they are lower than a nursing home’s average daily cost (HHC and AHCA, 2018; Liberman, 2018). Medicaid rates may also be deemed inadequate if the nursing home’s costs are insufficient to provide a minimally acceptable quality of care (HHC and AHCA, 2018; Mor et al., 2004; Rau, 2017), a condition that is particularly difficult to assess. Consequently, the following discussion will be limited to how Medicaid payment rates compare with nursing homes’ actual costs.

Using Medicare cost reports, MedPAC found that non-Medicare nursing home days, for which Medicaid is the largest payer, are associated with a negative margin (MedPAC, 2021a). Cost reports reflect either expenses that the nursing homes paid or accounting costs. However, not all of the costs that a nursing home reports may be necessary for delivering care. Further contributing to the difficulty of assessing Medicaid payment adequacy is the fact that nursing home cost reports are rarely audited (Harrington et al., 2021).

Reaching a qualitative judgment about Medicaid payment adequacy is possible through a review of how Medicaid programs set nursing home rates. Rates are based on the costs that nursing homes report with limits on how much of those costs are allowed or incorporated into rates and with how frequently more recent cost information is used to update rates (Harrington and Swan, 1984; MACPAC, 2019). The likely results of such a review would be that Medicaid rates cover the cost of care for Medicaid residents for different shares of nursing homes across states (MACPAC, 2019). For example, a state with limits that exclude few costs—excluding costs only above the 80th percentile, for example—and that are rebased annually using this year’s cost reports to set next year’s rates would have a substantial share of nursing homes with Medicaid rates exceeding the cost of care. Another state with stricter limits—at the 50th percentile, for example—and with less frequent rebasing using cost reports that are several years old would have fewer homes with Medicaid rates exceeding care costs.

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
×

When the Medicaid payment rate exceeds the average cost of care, rates may be seen as adequate by this test. However, when the Medicaid rate is less than average costs of Medicaid residents’ care, it still may be adequate to cover the incremental or marginal costs of care (HHC and AHCA, 2018; Liberman, 2018), depending on a nursing home’s overall business operations and payment arrangements. As noted above, nursing homes have three major payers for care, and the prices for each payer are determined separately. The Medicare and Medicaid programs establish the price or payment rates administratively. The market or an agreement between the resident and the facility determines the private pay rate (Fiedler, 2021). Economists refer to a business operating in this situation as a price-discriminating firm. A price-discriminating firm maximizes revenue or profit by serving customers who pay the incremental cost of serving them and some share of fixed costs. Such a firm may want a customer who pays less than the average cost to avoid losing profit when more of the fixed costs are paid by other customers. For example, if Medicare is covering fixed costs, Medicaid only has to cover the incremental cost of treating a nursing home resident. A nursing home would be forgoing profit to turn this resident away even if the resident did not cover the average costs of care.

For this reason, nursing homes historically have served Medicaid residents when Medicaid rates were less than their average costs. However, under this scenario a nursing home could not exist on Medicaid payments alone. This is consistent with evidence suggesting that nursing homes that close are more likely to have been financed predominantly by Medicaid and located in poorer neighborhoods with greater numbers of minority residents (Feng et al., 2011; Mor et al., 2004). A considerable number of closures among high-Medicaid-financed nursing homes in rural areas have occurred over the past few years (Healy, 2019).

Existing law requires that state Medicaid programs’ payments are adequate to provide access to care of sufficient quality.9 States are required to provide assurances that their payment rates meet this criterion.10 For certain providers, the Centers for Medicare & Medicaid Services (CMS) requires that states also submit evidence that their payment rates are indeed adequate. However, nursing home payment rates are not subject to this requirement despite Medicaid’s significant role as a payer of nursing home care. The lack of transparency or accountability in payment, flow of funds, and nursing home finances makes it extremely difficult to assess the adequacy of current Medicaid payments, and is discussed further in Chapter 8.

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9 Social Security Act, Title XIX §1902(a)(30)(A), 42 U.S. Code §1396a, 89th Cong., 1st sess. (July 30, 1965).

10 CMS Requirements, Medical Assistance Program—Payments for Services, 42 CFR §447 (1978).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
×

VALUE-BASED PAYMENT MODELS AND THE IMPACT ON QUALITY OF CARE

Traditionally, the most common approach to paying for U.S. health care services has been the FFS payment system, which pays for the quantity or intensity of services rendered, regardless of patient outcomes. Payment systems based on quantity have been called out as a key barrier to quality improvement (IOM, 2001), and various approaches to improving the quality of care in nursing homes have focused on shifting from paying for quantity to paying for quality using a strategy known as value-based payment (VBP). VBP encompasses an array of initiatives and terminology, a small sampling of which are shown in Box 7-2. VBP approaches have been used to pay for both chronic and acute care in nursing homes.

Value-Based Payment for Chronic Care

Payers began experimenting with value-based payment (VBP) in the nursing home setting four decades ago, beginning with pay-for-performance (P4P) approaches. P4P approaches are designed to provide incentives to health care providers to achieve high levels of performance or improvements in performance on specific quality measures (Briesacher et al., 2009; Werner et al., 2010). For example, as part of a test of establishing P4P in nursing homes in San Diego in 1980, financial incentives were awarded to 36 randomly selected nursing homes. These incentives were in addition to regular nursing home payments, and were linked to the improved functional or health status of the patient while a resident in the nursing home. Research revealed that residents of nursing homes in the test group had a greater likelihood of going home or going to a nursing home that provided less intensive care than the control group. Moreover, residents of nursing homes in the test group had lower rates of hospitalization or death than people in the control group of nursing homes (Norton, 1992). Despite these results, P4P was not more commonly implemented in nursing homes settings until the early 2000s.

Beginning in 2002, a number of state Medicaid agencies implemented P4P programs, with financial bonuses to nursing homes linked to the quality of chronic care delivered, typically in the form of a small per diem add-on for achieving the quality goals set out in the program (Kane et al., 2007; Werner et al., 2010). Although these programs varied by state, one evaluation of these P4P programs found a similar pattern of quality improvement in some areas and not others. For example, the evaluation revealed that states that implemented P4P had higher rates of improvement on three clinical quality measures—the percentage of residents being physically restrained, the percentage in moderate to severe pain, and the percentage who developed pressure sores—than in states that did not implement P4P. The impact of P4P on structural process measures such as total number of deficiencies and

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
×

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11 In contrast to diagnosis-related group payments, which pay for hospital stays using a prospectively determined payment rate based upon the patient’s diagnosis, bundled payments typically encompass an episode of care that spans care settings (e.g., hospital and post-acute care settings).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
×

nurse staffing, however, was not associated with improvements in quality. The evaluation found that deficiency rates worsened slightly under P4P, while there was no change in staffing levels (Werner et al., 2013).

VBP for Chronic and Post-Acute Care

In 2009, CMS launched a 3-year voluntary nursing home value-based purchasing demonstration in Arizona, New York, and Wisconsin to test nursing home P4P models that included financial incentives tied to long-stay and post-acute nursing home quality measures (White et al., 2006). Evaluators judged nursing homes’ performance using hospitalization rates, a set of quality measures, staffing levels, and survey inspections and found no systematic changes in the quality measures. Arizona achieved Medicare savings in the first year of the demonstration, as did Wisconsin for the first 2 years, while there were no savings in New York. Nursing homes made limited or no changes as a result of the demonstration (Grabowski et al., 2017). Given the lack of evidence for success, this 3-year demonstration project ended in 2012.

VBP for Post-Acute Care

As part of the 2014 Protecting Access to Medicare Act,12 CMS implemented the skilled nursing facility value-based purchasing (SNF VBP)13 program across all Medicare-certified nursing homes in 2018 (CMS, 2019c). The program assesses facility performance using a single risk-adjusted hospital readmission measure to generate performance scores and payment incentives. To date, this program has not demonstrated an effect on readmission rates. In the program’s first year, FY 2019, 26 percent of facilities earned positive incentives and 72 percent earned negative incentives, compared with 19 percent positive and 65 percent negative incentives in the second year, FY 2020 (Daras et al., 2021). Nursing homes that were not-for-profit, larger in size, and located in rural areas were more likely to receive positive incentives, as were facilities that had the highest registered nurse staffing levels (Daras et al., 2021). Nursing homes in lower-income neighborhoods, those with a majority of residents who were of a minority race or ethnicity, and those with larger populations of frail older adults were more likely to be penalized (Hefele et al., 2019; Qi et al., 2020).

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12 Protecting Access to Medicare Act of 2014, Public Law 113-93; 42 USC 1305, 113th Cong., 2nd Sess. (April 1, 2014).

13 As noted in Chapter 2, the term nursing home is used throughout the report for consistency, but skilled nursing facility is used in this section on post-acute care, the largest portion of which is provided in a SNF.

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
×

MedPAC is required by law to review the progress of the SNF VBP and make recommendations. In its June 2021 report, MedPAC identified five key design flaws of the program:14

  1. (1) The SNF VBP program assesses performance using a single outcome measure—all-cause readmissions—despite the fact that quality entails multiple measureable dimensions.
  2. (2) Thresholds set in advance—referred to as “cliffs”—may not be the best approach to encouraging quality improvement.
  3. (3) The SNF VBP puts aside a share of the incentive payments as program savings instead of paying out the entire sum as incentives to nursing homes.
  4. (4) SNF VBP’s minimum stay amounts are too low to ensure that the program rewards actual performance, instead of random variation.
  5. (5) The program does not take into account the variation in the social risk factors of nursing home patient populations; as a result, nursing homes with high-risk populations are at a disadvantage (MedPAC, 2021b).

Based on the identification of these key weaknesses, MedPAC recommended that Congress eliminate Medicare’s SNF VBP program and instead establish a new nursing home value incentive program. MedPAC’s recommendations called for Medicare to design the program to evaluate a limited set of performance measures, incorporate strategies to ensure reliable measure results, develop a way to reduce the impact of the “cliffs,” use a peer-grouping approach to take into account differences in patient social risk factors, and distribute all the savings to providers (MedPAC, 2021b).

Impact of VBP on Health Equity

The positive impact from implementation of P4P and related VBP in nursing homes has been limited, with gains largely confined to a narrow range of targeted measures and limited, if any, evidence for meaningful improvements in the overall quality of care (Grabowski et al., 2017; Werner et al., 2013). Importantly, prior research has suggested that VBP may have unintended consequences on nursing homes that serve a high proportion of Medicaid recipients or residents from minority populations. Nursing homes located in low-income ZIP codes are more likely to have hospital readmission rates that exceed the nursing home VBP threshold and therefore must pay financial penalties (Qi et al., 2020). Nursing homes that have populations that include more than 50 percent Black residents as well as homes

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14 The first three items refer to elements that are required by statute.

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
×

serving Hispanic or Latinx residents and those funded by Medicaid are also more likely to receive penalties under the nursing home SNF VBP (Hefele et al., 2019). These findings are consistent with evidence in other health care sectors, where providers’ structural and patient case-mix characteristics are significant predictors of provider performance in VBP programs (Chen et al., 2017; Gilman et al., 2015a,b; Ryan, 2013). These unintended effects are often the result of disparities between providers, rather than disparities within providers (Werner et al., 2013). As a result of disparities between providers, financial penalties are levied differentially on providers that care for a disproportionate share of low-income, Black, or Medicaid-insured individuals (Abrahamson, 2020; Damberg et al., 2014; Edelman, 2015; Sandhu et al., 2020).

Alternative Payment Models for Nursing Home Care

Partially in response to the lack of effectiveness of P4P approaches, more recent Medicare and Medicaid programs have implemented alternative payment models (APMs) for nursing home care. APMs are a type of VBP that holds providers financially accountable for the quality and cost of care delivered to patients. The majority of P4P models add a quality or value incentive to an FFS model (Delbanco, 2014). In contrast, APMs place greater emphasis on shifting as much revenue as possible to risk-based or population-based payments.

More than 40 percent of Medicare beneficiaries receive post-acute care after a hospital discharge (Tian, 2016), the largest portion of which takes place in a SNF (Werner and Konetzka, 2018). Medicare FFS is the predominant payer of SNF stays (Singletary et al., 2021). In 2018, for example, Medicare paid for 2.2 million SNF stays among Traditional Medicare beneficiaries, which cost a total of $28.5 billion (MedPAC, 2020). The amount spent on SNF stays is not only large but growing: between 2004 and 2010, Medicare spending on SNF stays increased an average of almost 8 percent a year and, since then, has continued to trend upwards, though at a slower rate (MedPAC, 2020). Large geographic variation in post-acute care spending (Newhouse and Garber, 2013) has led many to question the value of post-acute care, and has fueled payment reform efforts designed to control spending on post-acute care. APMs have been introduced, in part, to limit the growing cost of post-acute SNF care.

Increases in post-acute SNF care are driven in part by Medicare’s fee-for-service payment system, which pays separately for acute and post-acute care. Additionally, Medicare pays a per diem rate for SNF care, which may result in SNF stays that are longer than optimal—where the costs to the payer of one additional day in a SNF may outweigh the marginal benefit to the patient for that day (Werner et al., 2019a).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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In an effort to reduce unnecessary SNF utilization, Medicare has had a long-standing copayment policy for FFS beneficiaries. Medicare pays in full for the first 20 days of a SNF benefit period. The 21st day however, triggers an increase in the daily copayment from $0 to more than $185 (MedPAC, 2021a; Werner et al., 2019a). The result of this policy is that a large number of patients are discharged on their 20th day of a SNF stay (Chatterjee et al., 2019a). It may also result in stays that are longer than necessary preceding the 20th day of a SNF stay, as the FFS payment may encourage SNFs to keep patients in the facility as long as possible (Werner et al., 2019a).

Until recently, few incentives existed to minimize SNF use or SNF length of stay. Recent developments, including Medicare payment reforms focused on controlling total costs of care combined with the growing number of enrollees in MA plans, have led to the availability of other options to control costs and reduce unnecessary utilization (Werner et al., 2021). Most notably, bundled payment and accountable care organizations (ACOs) are increasingly holding providers accountable for the costs of care across provider types and episodes of care. Post-acute care has become a common target as providers seek ways to reduce the costs of care.

As a result of these financial pressures, post-acute care utilization is changing, both in terms of the number of people receiving post-acute care services as well as in terms of the intensity of use of post-acute care, reflected in changes in measures of intensity (such as length of stay or number of therapy hours). Patients are being discharged to the home setting more frequently (potentially with arrangements for home health care) instead of being discharged to a SNF (Barnett et al., 2019a; Finkelstein et al., 2018; McWilliams et al., 2018). Discharge to the home may be a suitable option for only the healthiest patients (Werner et al., 2019b) and SNF use remains a common and costly option (Tian, 2016). Among those who are admitted to SNFs, the intensity of care they receive is also changing as a result of APMs, with shorter lengths of SNF stays among people who are discharged to a SNF after a hospital stay (Barnett et al., 2019a; McWilliams et al., 2018).

Research indicates that the declines in SNF utilization may be associated with documented increases in the need for care at home (Bressman et al., 2021), as Medicare beneficiaries increasingly require assistance from informal caregivers and other non-Medicare-reimbursed home care aides after hospital discharge. These trends in increasing caregiver burden may intensify with the implementation of APMs (Chatterjee et al., 2019b), which are accelerating the decline of SNF utilization. Such effects, however, could be mitigated by increasing home-based supports for older adults and by providing enhanced support to caregivers through training and financial compensation, such as the Money Follows the Person demonstration project (Musumeci et al., 2019).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Episode-Based Payment for Post-Acute Care

Under the existing FFS payment system, hospitals and nursing homes receive separate payments for care and do not coordinate the care they provide to patients across these settings. To control costs while improving quality of care, Medicare introduced the Bundled Payments for Care Improvement Initiative (BPCI) in 201315 and the Comprehensive Care for Joint Replacement Model (CJR) in 2016,16 both authorized by the 2010 Affordable Care Act. BPCI pays hospitals and health care providers based on episodes of care rather than on a FFS basis (Parekh et al., 2017). BCPI is a voluntary program designed to shift overall financial responsibility to hospitals for all hospital and post-hospital services associated with a single episode of care. At its inception, BPCI included coverage for 48 clinical episodes ranging from treatment for congestive heart failure and stroke to lower joint replacement (mainly hip and knee), the latter of which is the most common clinical category of post-acute care (Rolnick et al., 2020). CJR, in contrast, is a mandatory program implemented in 67 markets at its inception that covers all hip and knee replacements. While BPCI ended in 2018, it was replaced by BPCI Advanced,17 which extends BPCI to include more episodes, longer episode windows, and more downside risk (CMS, 2022b).

Hospitals have developed a number of strategies to strengthen their relationships with SNFs to exert influence over the quality and cost of post-acute SNF care for their referred patients. A study of 22 hospitals and health systems participating in either Medicare’s Comprehensive Care for Joint Replacement model or the BCPI model found that common strategies hospitals used to strengthen their relationships with SNFs included creating networks of preferred SNFs to monitor the quality and cost of SNF post-acute care. “Common coordination strategies included sharing access to electronic medical records, embedding providers across facilities, hiring dedicated care coordination staff, and creating platforms for data sharing” (Zhu et al., 2018). (See Chapter 9 for discussion of health information technology in nursing homes.)

Research has found that cost savings achieved under alternative payment models are driven almost entirely by a decrease in the use of institutional post-acute care, with patients being discharged to home settings more frequently instead of being discharged to a nursing home (Finkelstein et al., 2018). In addition, some studies observed declines in nursing home

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15 See https://innovation.cms.gov/innovation-models/bundled-payments (accessed October 21, 2021).

16 See https://innovation.cms.gov/innovation-models/cjr (accessed October 21, 2021).

17 BPCI Advanced qualifies as an Advanced APM under the Quality Payment Program. See https://innovation.cms.gov/innovation-models/bpci-advanced (accessed February 14, 2022).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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length of stay under episode-based payments which ranged from 0.1 days to 2.1 days; these reductions were not associated with an increase in readmission rates for patients (Barnett et al., 2019a; McWilliams et al., 2018).

There is concern about potential unintended consequences of any new payment approach; thus, careful monitoring for signs of such consequences is critical as bundled payments are applied to a broader array of conditions. The BPCI Advanced program will generate additional data critical to strengthening the existing evidence base on bundled payments. These data, and data specifically collected to monitor the effects of the program on health equity, should be used to monitor and address any unintended consequences of this payment model (Liao et al., 2020).

Bundled payment models are not unique to the U.S. health care system. Payers in other nations are also looking to alternative payment models that offer incentives to health care providers to increase value while containing costs of care. An eight-country study of the impact of bundled-payment models on health care value examined 23 bundled payment–model initiatives in the United States and seven other nations.18 The study reviewed a total of 35 research studies on various aspects of the bundled-payment model. Nearly all the studies (32 out of 35) examined the impact of the model on health care quality and spending, and a majority of those studies (20 out of 32) found that bundled-payment initiatives were associated with limited savings or modest reduction in the growth of health care spending. More than half of the studies (18 out of 32) noted improvements in most of the measures of quality that were evaluated. The study concluded that bundled-payment models have the potential to result in lower health care spending with either an improvement in or no impact on quality. Importantly, the studies did not evaluate patient experiences of care under the payment model (Struijs et al., 2020).

Accountable Care Organizations

The other common APM implemented in nursing homes is an accountable care organization. An ACO typically consists of a group of clinicians, hospitals, and other health care providers who work together to provide coordinated, high-quality care to their Medicare patients. According to CMS, the goal of establishing an ACO is “to ensure that patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds both in delivering high-quality care and spending health care dollars more wisely, the ACO will share in the savings it achieves for the Medicare program” (CMS, 2021c).

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18 Other countries studied included Denmark, England, Netherlands, New Zealand, Portugal, Sweden, and Taiwan.

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Currently, the largest Medicare ACO is the Medicare Shared Savings Program. Medicare ACOs affect nursing home care in three main ways: (1) when a nursing home is a provider in an ACO; (2) when nursing home residents are attributed to an ACO; and (3) when a nursing home leads an ACO, focusing on managing all care for long-term care residents. Accumulating evidence suggests that the first two cases result in higher quality for post-acute care and chronic care, and in nursing homes being more appropriately used for post-acute care (Agarwal and Werner, 2018; Chang et al., 2019, 2021; Colla et al., 2016). There is little evidence to date, however, of the effect of nursing home–led ACOs, which may have the largest potential impact in terms of addressing the misalignment introduced by multiple payers for nursing home care (Chang et al., 2019, 2021).

Accountable Care Organizations for Post-Acute Care

In theory, ACOs may seek to reduce unnecessary nursing home use to reduce costs and, in cases when individuals do use nursing home care, to coordinate care across hospitals and nursing homes. In practice, however, the evidence suggests that ACOs largely generate savings by reducing nursing home use (Barnett et al., 2019b; McWilliams et al., 2017). Although an increasing number of hospitals participate in an ACO, fewer nursing homes do: half of all ACOs formally include at least one post-acute service in the ACO, and only 18 to 33 percent of ACOs include a nursing home (Colla et al., 2016; OIG, 2017). Those ACOs that reported having a formal relationship with a post-acute provider were more likely to report providing care aimed at improving transitions and coordinating care for patients (Colla et al., 2016). Those Medicare beneficiaries who were discharged from ACO-affiliated hospitals to ACO-affiliated skilled nursing facilities had better patient outcomes—lower hospital readmission rates, shorter hospital lengths of stay, and lower Medicare costs—than beneficiaries cared for by non-ACO-participating providers and also than beneficiaries treated at the ACO-affiliated hospitals before their ACO affiliation (Agarwal and Werner, 2018).

Accountable Care Organizations for Chronic Care

ACOs for long-stay nursing home residents are relatively limited; less than 25 percent are attributed to a Medicare ACO, and approximately 1.6 percent of all U.S. nursing homes are ACO providers (Chang et al., 2019). Available research indicates a potential beneficial effect of ACOs in a number of key domains, including enhancing care coordination across multiple settings, reducing unnecessary hospitalizations, and lessening the

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
×

fragmentation caused by multiple payers. A study that examined outcomes among ACO-attributed nursing home residents found that compared with a matched cohort of non-attributed residents, ACO-attributed residents had fewer hospitalizations for ambulatory care–sensitive conditions and fewer outpatient visits. The study did not find any difference, however, in total expenditures between the two resident cohorts (Chang et al., 2021).

There are few examples of nursing home–led ACOs. One known example is the long-term care (LTC) ACO, the first ACO focused on Medicare beneficiaries residing in long-term care facilities. More than 200 long-term care facilities participate in the LTC ACO, which launched in 2016 and is a subsidiary of Genesis HealthCare. A formal evaluation of this ACO has not been completed.

State Medicaid programs are also beginning to offer ACO programs that, in addition to primary and acute medical care, may also be responsible for long-term care. However, the challenge for nursing home-led Medicare ACOs and Medicaid ACOs is that to effectively serve Medicare–Medicaid enrollees they must operate across both the Medicare and Medicaid programs. This has been difficult to coordinate and often creates conflicting financial incentives (Collette, 2020; Leavitt Partners, 2017; Matulis and Lloyd, 2018).

Alternative Payment Models and Health Disparities

Many experts believe that APMs are promising approaches to meaningfully improve quality of care and constrain health care spending. Although the evidence is not yet complete (Baicker and Chernew, 2017; Burns and Pauly, 2018), early research in nursing home settings suggests this may be the case. At the same time, concerns about the impact of APMs on disparities exist, much as they do for P4P programs. Because sicker patients who need more care become economically unattractive under APMs, providers may avoid caring for complex patients. Evidence to date from settings outside of nursing homes does not support this concern, with evidence of no decrease in access to care for vulnerable older adults or Black patients under BPCI (Joynt Maddox et al., 2019a; Navathe et al., 2018). Similarly, while ACOs are more likely to locate in well-resourced communities (Yasaitis et al., 2016), once they do, research suggests that they do not decrease access to care for Black or low-income patients (Lee et al., 2020).

APMs may nonetheless worsen disparities between participating providers. Hospitals that participate in the voluntary BPCI programs tended to be better resourced (Joynt Maddox et al., 2019b). For-profit and public hospitals that participated in BPCI were less likely to drop out of the program than nonprofits (Joynt Maddox et al., 2018).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Managed Care in Medicare and Medicaid

Managed care in the Medicare program takes the shape of what are known as Medicare Advantage (MA) plans. These plans cover chronic care and post-acute care services.

Medicare Advantage Plans for Chronic Care

MA does not typically pay directly for long-stay care in a nursing home. However, Medicare special needs plans (SNPs) are a subcategory of coordinated care plans limited to beneficiaries with specific diseases or characteristics. These SNPs customize benefits, provider choices, and drug formularies to align with the specific needs of their beneficiaries. Authorized by Congress in 2003, SNPs were first available in 2006. Various laws, including the Affordable Care Act in 2010, have extended authority for SNPs, and more recently the Bipartisan Budget Act of 2018, which included the CHRONIC Care Act (SNP Alliance, 2021),19 permanently authorized SNPs. Nearly 4 million Medicare beneficiaries are currently enrolled in SNPs, and these beneficiaries accounted for approximately 15 percent of total MA enrollment in 2021 (Freed et al., 2021).

There are three types of SNPs. The first type, the chronic condition SNP (C-SNP), is limited to Medicare beneficiaries with severe or disabling chronic conditions. Currently there are 15 SNP-specific chronic conditions that allow eligibility for C-SNP benefits.20 Approximately 10 percent of SNP enrollees are in C-SNPs (Freed et al., 2021). C-SNPs might be applicable to the long-term care setting as those individuals may receive post-acute care in a nursing home following a hospital stay (Stefanacci and Pakizegee, 2020).

The second type of SNP, the institutional SNP (I-SNP), is a specialized form of MA that is limited to Medicare beneficiaries who are long-term residents of a nursing home (CMS, 2016). These plans were designed to facilitate the alignment of financial incentives of nursing homes and Medicare with the companion goal of improving care delivery across various health care settings (MedPAC, 2013). Individuals in I-SNPs account for 2 percent of SNP enrollees (Freed et al., 2021). While Medicaid (or a private payer) is still responsible for the costs of long-term nursing home care, the I-SNP plan is financially responsible for Medicare-eligible health care costs, which provides a strong incentive for the plans to make investments to improve care provided in nursing home settings (Goldfeld et al., 2013).

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19 Bipartisan Budget Act of 2018, Public Law 115-123; 115th Cong., 2nd sess. 42 USC 1305 (February 9, 2018).

20 For the complete list of conditions, see https://www.cms.gov/Medicare/Health-Plans/SpecialNeedsPlans/C-SNPs (accessed November 4, 2021).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Developed out of a demonstration of the Evercare model21 (Kane et al., 2002), I-SNPs use advanced practice clinicians, such as nurse practitioners (NPs), to coordinate and deliver care in conjunction with I-SNP members’ primary care physicians, nursing home staff, and other providers. This enhanced care is provided with no additional cost to the patient or nursing facility. The advanced practice clinicians create a comprehensive care plan for each I-SNP member, which is then shared with all members of the care team. APRNs and NPs provide primary, acute, and preventive care for I-SNP members and hold family care conferences to help identify the resident’s medical, behavioral, and social needs; to establish goals of care; to specify therapeutic approaches; to coordinate care with specialists; and to manage the resident’s treatment. The goal of this enhanced care model is to use onsite advanced practice clinicians to reduce residents’ unnecessary hospitalizations, working together with a health plan that is responsible financially for the nursing home and medical care of the residents. Regulations require that an individual must have a 3-day stay in a hospital to qualify for Medicare Part A benefits in a SNF. An important feature of the I-SNP is that the plan waives that requirement and enables an individual to receive SNF skilled services without a qualifying hospital stay. The I-SNP’s team of advanced practice clinicians is focused on effective medical management to enable them to identify and treat a patient’s change in condition early and thereby reduce unnecessary and avoidable ED visits and hospitalizations (McGarry and Grabowski, 2019b).

An early CMS-sponsored evaluation of the I-SNP model showed improvement in quality for I-SNP-insured nursing home residents, with 50 percent lower rates of hospitalizations compared with other nursing home residents and resulting reductions in spending. The evaluation estimated that each NP saved an average of approximately $103,000 a year in hospital costs per NP (Kane et al., 2003).

A more recent evaluation found that compared with traditional Medicare FFS nursing home residents, I-SNP beneficiaries had lower rates of use of inpatient and emergency department services and higher use of skilled nursing facility care, which resulted in lower overall spending (McGarry and Grabowski, 2019b).

The third type of SNP is the dual SNP or D-SNP. Nearly 90 percent of SNP enrollees are in D-SNPs (Freed et al., 2021). The Affordable Care Act of 2010 authorized a type of D-SNP known as the fully integrated dual eligible (FIDE) SNP. FIDE SNPs give states expanded authority and flexibility to more closely integrate Medicare and Medicaid services. FIDE SNPs are required to provide Medicaid LTSS as well as Medicare benefits

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21 See https://innovation.cms.gov/Medicare-demonstrations/evercare-demonstration (accessed October 21, 2021).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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and are required to have established arrangements to promote alignment between the two programs. FIDE SNPs are the most integrated delivery model outside of the Program of All Inclusive Care for the Elderly22 and the Financial Alignment Initiative demonstrations, and they are the only D-SNP plans that are financially at risk for all Medicare and Medicaid services (Verdier et al., 2015).

Little evidence exists about the effects of FIDE SNPs on the value of nursing home care. One study reviewed the Minnesota Senior Health Option, a care model administered by FIDE SNPs, and found decreased hospitalizations and emergency department use (Anderson and Feng, 2016). Another study found that enrollment in the FIDE SNP reduced hospital readmission among dually enrolled members in a program in California (Sorbero et al., 2018).

More recently, the Bipartisan Budget Act of 201823 provided permanent legal authorization for D-SNPs and included requirements for a new D-SNP category, the highly integrated dual eligible (HIDE) SNP, introduced in 2021. In contrast to a FIDE SNP, a HIDE SNP is required to provide (directly or through a Medicaid managed care plan) either LTSS or behavioral health services as well as other Medicaid services to its dual eligible members (CMCS, 2019; MACPAC, 2021; Serna et al., 2022).

Medicare Advantage (MA) Plans for Post-Acute Care

MA plans cover post-acute SNF care for beneficiaries with a demonstrated need. These plans, unlike FFS plans, are able to negotiate contracts with nursing homes. MA plans pay for beneficiaries’ services out of the monthly capitated payments the plans receive for each covered member. MA plans have a greater ability to manage their enrollees’ use of nursing homes and can restrict the enrollees’ choice of providers to those considered to be high-value providers (MedPAC, 2015). Some research has found that MA beneficiaries are more likely than FFS beneficiaries to enter low-quality nursing homes after hospital discharge (Meyers et al., 2018). Other studies, however, have found that MA beneficiaries also have better outcomes than their FFS Medicare counterparts, including lower rates of hospital readmission and higher rates of return to the community, though they also appeared to be healthier at baseline (Huckfeldt et al., 2017).

Prior research revealed lower SNF use and shorter SNF length of stay for common conditions among MA beneficiaries than among those enrolled

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22 For more information, see https://www.medicaid.gov/medicaid/long-term-services-supports/program-all-inclusive-care-elderly/index.html (accessed November 4, 2021).

23 Bipartisan Budget Act of 2018, Public Law 115-123; 42 USC 1305, 115th Cong., 2nd Sess. (February 9, 2018).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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in traditional Medicare (Huckfeldt et al., 2017). Some of this difference may be related to healthier beneficiaries enrolling in MA plans (Kumar et al., 2018). It may also reflect the higher level of cost sharing that MA beneficiaries might assume for SNF care (depending upon the specific MA plan they are enrolled in) compared with FFS beneficiaries, or the use of management strategies that MA plans apply to limit the use of SNF services (Gadbois et al., 2018; Keohane et al., 2015). Research also indicates that MA enrollees tend to enter lower-star-rated nursing homes than traditional Medicare beneficiaries (Meyers et al., 2018).

Including Hospice in Medicare Advantage Plans

CMS launched a 4-year demonstration of a new value-based insurance design model for hospice care in January 2021. The demonstration, known as the hospice “carve-in,” addresses the fragmentation of care and fiscal responsibility for hospice care discussed earlier in this chapter. The model will evaluate the inclusion of the Medicare Part A hospice benefits in MA plans with the provision of palliative care, transitional concurrent care, and supplemental benefits. Participating MA plans will be financially responsible for Medicare Part A and Part B benefits.

Patients will have the choice of an in-network or out-of-network provider in the first 2 years of the demonstration, though palliative care, transitional concurrent care, and supplemental benefits will be available only to patients receiving care from in-network providers. MA plans participating in the demonstration program cannot implement cost sharing that would be higher than the amount allowed under original Medicare for hospice services provided in network or out of network (CMS, 2021d).

Medicaid Managed Care

In recent years, state Medicaid programs have started to turn to managed care plans to administer LTSS benefits. About half of all states have managed care contractors, though not all of those states use managed care plans to administer the nursing home benefit. Instead, they may focus only on in-home and community LTSS services. Using the Medicaid Section 1115 demonstrations, 25 states offered Medicaid managed care programs as of 2020, up from 8 states in 2004 (Libersky et al., 2018; MACPAC, 2022). States using a managed care plan for nursing homes may set payment rates for nursing homes or delegate that responsibility to the managed care plan (Nelb, 2020).

Research has yet to shed much light on the quality of nursing home care in managed care organization (MCO) networks. One study of a demonstration project in California found that the MCOs developed a wide network

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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of nursing homes but selected nursing homes for the network without paying sufficient attention to quality criteria. Nursing homes in the network scored significantly lower on selected quality measures than non-network nursing homes (Graham et al., 2018).

Achieving Health Equity through Alternative Payment Models

Research has not yet provided evidence that VBP has improved—or even directly focused on—access to care or health outcomes for populations with social risk factors, including racial and ethnic minorities, rural populations, and individuals with disabilities (Liao et al., 2020). CMS has focused on monitoring the unintended effects of VBP among populations with social risk factors (Liao et al., 2020). For VBP to be effective, however, it must tackle head on the root causes of persistent health inequities and disparities in access and quality, namely, systemic bias and underperformance in the health care system for at-risk populations (Werner et al., 2021).

An explicit part of paying nursing homes under new models such as APMs must be a concentrated focus on reducing disparities. Toward that end, the quality measurement and quality goals that APMs use to determine payment should include measures of improving outcomes for disadvantaged populations and reducing existing disparities (Damberg and Elliot, 2021). It is also imperative that all new payment programs include explicit monitoring and evaluation of health care disparities.

The biggest challenge for achieving health equity under APMs is related to the distinct financial resources across providers. Ample evidence exists that those nursing homes caring for a disproportionate share of Medicaid-insured individuals have lower quality of care (Gandhi et al., 2021; Grabowski, 2004; Grabowski et al., 2004b; Mor et al., 2004; Sharma et al., 2020). An essential first step to avoid further exacerbating disparities will be to address payment inequities across nursing homes by increasing Medicaid payment rates to levels adequate to cover the costs of caring for residents.

FINANCING NURSING HOME CARE

As the discussion of payment mechanisms in this chapter has illustrated, the U.S. approach to financing nursing home care is not so much an intentional system as a set of circumstances that has evolved over time to fill the largest gaps. Private insurance is rare, and few people can pay out of pocket for an extended nursing home stay (Dong et al., 2021; Konetzka, 2014a). The result is that Medicaid plays a dominant role as the default payer of nursing home care, but it is constantly subject to state budget constraints.

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Medicare revenues from post-acute care play a disproportionate role in financial sustainability, and services such as hospice are paid for separately and are not well integrated into standard care.

One implication of this unsystematic financing system is a lack of equity in access to high-quality nursing home care. Such heavy reliance on Medicaid to fund nursing home care, with strict financial and health-related eligibility rules, means that many individuals may go without needed care or may receive care that is inadequate in quality or quantity. High-quality nursing homes have long considered prospective residents on Medicaid to be the least attractive financially (He and Konetzka, 2015). Extensive research has shown that dependence on Medicaid is associated with admission to lower-quality facilities with lower staffing ratio, more regulatory deficiencies, and a higher proportion of residents of color (Konetzka and Werner, 2009; Mor et al., 2004). Eligibility rules also differ across sites of care and across states, even within Medicaid, which may lead to inequities across states.

The lack of equity in access to high-quality nursing home care may also reinforce broader issues of systemic racism. Individuals who need Medicaid funding for long-term care must first “spend down” all their assets, thereby impoverishing themselves. By some estimates, up to two-thirds of the population would rely on Medicaid should they end up needing nursing home care (Brown and Finkelstein, 2008); many of those would not consider themselves poor throughout their lives. Thus, unlike many other types of health care for which the risk of financial burden is diversified across insured populations, those who end up needing nursing home care experience a large financial shock from spending down their assets (Sloane et al., 2021).

A second implication of this unsystematic financing system is site-specific payment, creating often irrational payment and eligibility differentials which can lead to unintended consequences. It has long been recognized that health care in the United States, and especially long-term care, is too fragmented in its payment and delivery across types and sites of services. Nursing home care is one segment of a continuum of care that people might need for assistance with functional and cognitive impairment during their lifetimes. In particular, separate financing and payment systems for home- and community-based care and institutional care create a false dichotomy and present barriers to the rational allocation of resources across settings that takes into account costs as well as an individual’s needs and preferences (Konetzka, 2014b; Ng et al., 2010). All too often, Medicaid recipients do not have a choice of long-term care settings, and despite the expansion in Medicaid home- and community-based care, the program still has an institutional bias toward nursing home care.

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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State and federal policy efforts have focused on identifying individuals who can be cared for in the community. These include both nursing home diversion efforts for community elders (Bardo et al., 2014) and nursing home transition efforts for residents to return to the community (Haas et al., 2019; Robison et al., 2020). Despite these efforts, research suggests that individuals who require a relatively low level of care—who conceivably could be cared for in the community—are still residing in nursing homes (Mor et al., 2007). Moreover, there are a series of risk factors that have been identified as predicting transition from home- and community-based care to long-stay nursing home care, including Alzheimer’s disease, money management issues, living alone, and prior short-stay nursing home stays (Greiner et al., 2014). The supply of community alternatives has been found to be negatively associated with the prevalence of residents with low care needs in nursing homes (Cornell et al., 2020; Kane et al., 2013).

Robust financing for both home- and community-based care and nursing home care services is needed to address the broad range of long-term care needs of older adults, as has been discussed throughout this report. There will always be a portion of the older adult population who require nursing home care based on a range of factors, not least of which is the level and intensity of required health care services. This is particularly the case as increasing numbers of older adults are living with multiple complex conditions, which is likely to render a nursing home a care setting preferred by individuals and their families. Many older adults lack the resources to be able to live at home and are thus unable to receive care in a home and community setting, while many older adults living at home suffer from social isolation and loneliness (Grabowski, 2021; Guo et al., 2015; Wolff et al., 2008). On the other hand, there are also a number of residents with relatively low levels of care needs who do not require a nursing-home level of care but often have minimal or no access to community alternatives for reasons including personal financial limitations and low investment in community alternatives (Cornell et al., 2020; Hass et al., 2019; Mor et al., 2007; Segelman et al., 2017; Wang et al., 2021).

Various proposals for some type of federal long-term care insurance (LTCFC, 2016), one that covers the continuum of care, including nursing home care, have been studied over the past few decades, such as the Community Living Assistance Services and Supports (CLASS) Act that Congress passed as part of the Affordable Care Act (Favreault et al., 2015, 2016). Neither CLASS, a voluntary, federal, long-term care insurance program, nor any previous effort to expand long-term care coverage has been implemented.24

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24 For more information, see https://www.kff.org/health-costs/issue-brief/health-care-reform-and-the-class-act and https://khn.org/news/class-act-implementation-halted-by-obama-administration (accessed November 4, 2021).

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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In theory, relative to state-specific Medicaid programs, a federal long-term care benefit that covers everyone could be more easily integrated and aligned with Medicare, and in so doing, address the fragmentation across long-term care, post-acute care, hospice, and other health care services discussed above.

As of this writing, Congress is considering the Well-Being Insurance for Seniors to be at Home Act, a proposal based on public–private partnerships to provide catastrophic coverage for long-term care (Cohen and Butler, 2021). States, for their part, are considering enacting public longterm care insurance programs. The state of Washington created a long-term care insurance program in 2019. Other states, such as California, Illinois, Michigan, and Minnesota, are looking at alternative long-term care financing approaches (Cohen et al., 2020; Gleckman, 2019). In addition, the proposed legislation known as the Build Back Better Act, H.R. 5376 (BBB) includes provisions for increased funding for HCBS (Cox et al., 2021).

Many other high-income countries have implemented and sustained national long-term care coverage for their populations, incorporating both institutional and home-based care; the structure of some of these programs could serve as models for the United States (Chen et al., 2020; Gleckman, 2010; Grabowski, 2021; Merlis, 2004; Weiner et al., 2020). The establishment of a federal long-term care benefit to replace the existing fragmented financing arrangements certainly has both advantages and disadvantages (summarized in Table 7-1). The major advantage would be increased access to services. As discussed, Medicaid recipients often lack access to both community-based long-term care options and high-quality nursing home care. Similarly, many middle-income Americans who do not qualify for Medicaid still cannot afford high-quality long-term care. One study projects that by 2029, more than half of the nation’s middle-income older adults will be unable to afford the level of care they require for their health and functional needs (Pearson et al., 2019). These middle-income individuals often also cannot purchase private long-term care insurance given medical underwriting (Cornell et al., 2016). A federal benefit would eliminate individual underwriting (no one would be excluded from the program because they have a high risk of needing long-term care). As a result, a federal benefit system would provide broader access to nursing homes and other long-term care services.

Under the existing financing arrangements, the lowest-quality nursing homes disproportionately care for Medicaid recipients and persons of color. The new federal benefit would help to address some of the inequities across facilities and individuals by payer status and race. The system also requires families to spend down their assets to qualify for Medicaid and rely heavily on unpaid caregiving from family members. A federal benefit would protect families against catastrophic long-term care costs, and also lower the reliance on unpaid caregivers because they would have more comprehensive coverage and better overall quality of care.

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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TABLE 7-1 Advantages and Disadvantages of a Federal Long-Term Care Benefit

ADVANTAGES
A federal long-term care benefit could serve as a sustainable funding model to broaden access to all long-term care services for all, featuring robust financing for both nursing home and home- and community-based care, with the financial costs and risk of all long-term care services spread across the population.
A new federal long-term care benefit could
  • Reduce the existing fragmentation between payers because Medicare pays only for short-stay SNF post-acute care and Medicaid pays only for long-stay nursing home care.
  • Eliminate the cross-subsidies and perverse incentives in the current system that lead nursing homes to pursue more financially attractive short-stay residents over Medicaid-financed long-term residents.
  • Eliminate the requirement that individuals spend down most of their assets to qualify for Medicaid long-term care.
  • Provide options to middle-income individuals who cannot afford to pay privately for long-term care but are too wealthy to qualify for Medicaid.
  • Ensure adequate financing for comprehensive, high-quality long-term care for all and so reduce current inequities.
  • Reduce burden on family caregivers through more comprehensive coverage.
  • Provide uniform coverage, in contrast to the system of Medicaid long-term care benefits, which vary across states.
  • Be designed to align with/integrate with Medicare coverage.
  • Facilitate the elimination of existing disparities created by heavy reliance on Medicaid to fund long-term care; dependence on Medicaid financing for long-term care is associated with lower-quality nursing homes.
  • Address the current disparities in long-term care wherein individuals of color covered by Medicaid typically receive care in low-quality nursing homes.
  • Address the false dichotomy and barriers to the rational allocation of resources across settings created by separate financing and payment systems for home and community-based services and institutional care.
  • Provide protection against catastrophic long-term care costs and, like most social insurance would spread the financial risk across the population.
  • Shift responsibility for regulatory oversight, financial transparency, and accountability of nursing homes from the states to the federal government, providing consistency across states.
DISADVANTAGES
  • The cost of a new federal long-term care benefit will be significant, will require additional sources of revenue, and might lead to increased taxes to help finance longterm care services.
  • States will be less able to tailor benefits to their populations; incentives for state innovation in benefit design will be reduced.
  • Due to the costs, the political challenges of enacting a new federal benefit program will be significant.
Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Finally, a new federal long-term care benefit would help address the disconnect and fragmentation both within Medicaid and across Medicaid and Medicare for long-term care recipients (Grabowski, 2007). A federal benefit would eliminate Medicaid’s current institutional bias in most states, whereby community-based care is less generously covered. Moreover, the federal benefit could be aligned and integrated with Medicare coverage. Because a federal benefit would cover all long-term care recipients, it could be more easily integrated with Medicare coverage relative to existing Medicaid benefits, which vary across states and are available only to qualifying individuals.

A key challenge related to enactment of a federal long-term care benefit is the potential cost of such a program. The program would likely be self-funded by contributions from participants along with public subsidies for lower-income individuals. On an individual level, this would likely shift the burden of paying for long-term care to a broader group of taxpayers. On a broader societal level, this new federal benefit will shift the current burden of funding care for lower-income individuals from Medicaid to this new federal program.

A federal benefit may be associated with a risk of fewer opportunities for innovation in care delivery or limited ability to customize the program to align with state-specific needs. However, such risks have been addressed in the federal Medicare program, such as through innovative options, including MA plans, that offer greater flexibility.

An important consideration is whether a federal benefit would be feasible politically given historical resistance to this type of social insurance program in this country. As with any new such program, a critical decision will be whether to cover everyone from the beginning or only those who are vested in the program (i.e., paid in long enough to be eligible). This will have major implications in terms of the role of public financing for the early years of the program. Ultimately, a federal benefit would be designed to cover the continuum of long-term care settings while paying a rate commensurate with the delivery of high-quality care.

KEY FINDINGS AND CONCLUSIONS

Through its review of the evidence on nursing home payment and financing, the committee identified several important problems with the current system. First, there has been insufficient investment in quality care in nursing homes, with nursing homes dependent to some degree on Medicaid payment rates. Medicaid plays a dominant role as the default payer of nursing home care, but it is constantly subject to state budget constraints. Second, the system is fragmented across post-acute care,

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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long-term care, hospice, and other services. This fragmentation creates inefficiencies and unintended incentives for overuse of some services, underuse of others, and cost shifting among more lucrative and less lucrative services. The current system is not one that anyone would have designed from the outset.

The fragmentation and potential cost shifting between Medicare-funded post-acute care services and mostly Medicaid-funded long-term care services is particularly problematic. Given that Medicare profit margins are much higher than Medicaid profit margins and that the delivery of postacute services is, in some ways, separable from the delivery of long-term care services, economists would expect increased specialization over time in a free and competitive market. However, there appear to be institutional, regulatory, and economic obstacles in the nursing home market to doing so, given the current payment rates and capital stock. Even new entrants to the nursing home sector maintain a mix of long-term care and post-acute care beds.

To move toward a more efficient system and reduce fragmentation, the committee considered the potential of moving post-acute care out of the domain of nursing homes. This shift would enable nursing homes to specialize in long-term care, reduce fragmentation among payers, and encourage higher-quality care without the need for cost shifting. The committee recognized that such a change would require (1) ensuring that payment for longterm care is sufficient to sustain nursing homes without cross-subsidization from other services, and (2) identifying which providers should be responsible for post-acute care and aligning the economic incentives such that they are willing to do so.

The committee considered whether a promising approach would be to shift the provision of post-acute care to hospitals, as has been called for by a number of nursing home experts (Fulmer et al., 2021; Grabowski and Mor, 2020). The committee initially considered this change to be feasible for several reasons. First, the average patient census in hospitals has been declining, so hospitals may have the necessary capacity. Second, hospitals have already been increasing their responsibility for post-acute care costs through payment reforms such as bundled payments. Third, many hospitals have historical experience providing post-acute care on site, though the economics of this model in the past few decades have not been favorable. Hospitals might also increase the number of people getting post-acute care at home rather than on site.

In the course of its considerations, the committee assessed the unintended consequences of implementing such a change. Medicare, for example, could evaluate and set payment rates for post-acute care without considering the spillover effects on long-stay residents or the financial

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
×

viability of nursing homes. If the underlying payment rates are insufficient, there could be an exit from the nursing home market and a shortage of nursing home care providers. As a result, more people might be encouraged to receive post-acute care at home than would be optimal for their health. For those too sick to go home, hospitals might prefer to pay for post-acute care in a nursing home rather than provide such care in the hospital setting. Allowing such arrangements would change the flow of funds, but ultimately it would not address the financial fragmentation in nursing homes. Based on careful consideration of all these factors, the committee ultimately decided not to recommend the separation of short-stay from long-stay nursing home residents, given the potential for greater risk of unintended consequences for both short- and long-stay patient populations.

The committee identified a number of additional financing and payment findings and conclusions:

  • Medicare and Medicaid provide conflicting incentives between short-stay and long-stay payments, resulting in fragmentation and cross-subsidization across payers.
  • Current incentives encourage nursing homes to transfer residents to hospitals rather than caring for people in the nursing home and then have them return to the nursing home after a qualifying hospital stay for post-acute care, with higher Medicare reimbursement, before transitioning back to long-stay care, with lower Medicaid reimbursement.
  • Although an extensive body of research supports the strong connection between spending on direct care for residents and the quality of care, nursing homes are not required by law to devote a specific portion of their payment to direct care for residents.
  • Value-based payment arrangements in Medicare, which link payment directly to the quality of care rather than the volume of services, are associated with lower rates of nursing home use and shorter lengths of stay than traditional Medicare payments.
  • The impact of APMs for long-stay nursing home care is unknown but warrants exploration and testing in real-world situations.
  • The quality measurement and quality goals that APMs use to determine payment should include measures of improving outcomes for disadvantaged populations and reducing existing disparities.
  • The COVID-19 pandemic has resulted in a decline in admissions to nursing homes for post-acute short stays which persisted even after the rates of home health use rebounded, providing the opportunity to rethink and reshape the model of providing post-acute care in nursing homes.

Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Suggested Citation:"7 Payment and Financing." National Academies of Sciences, Engineering, and Medicine. 2022. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff. Washington, DC: The National Academies Press. doi: 10.17226/26526.
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Next: 8 Quality Assurance: Oversight and Regulation »
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Nursing homes play a unique dual role in the long-term care continuum, serving as a place where people receive needed health care and a place they call home. Ineffective responses to the complex challenges of nursing home care have resulted in a system that often fails to ensure the well-being and safety of nursing home residents. The devastating impact of the COVID-19 pandemic on nursing home residents and staff has renewed attention to the long-standing weaknesses that impede the provision of high-quality nursing home care.

With support from a coalition of sponsors, the National Academies of Sciences, Engineering, and Medicine formed the Committee on the Quality of Care in Nursing Homes to examine how the United States delivers, finances, regulates, and measures the quality of nursing home care. The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff identifies seven broad goals and supporting recommendations which provide the overarching framework for a comprehensive approach to improving the quality of care in nursing homes.

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