The National Imperative to Improve Nursing Home Quality Honoring Our Commitment to Residents, Families, and Staff (2022) / Chapter Skim
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7 Payment and Financing
7 Payment and Financing
Pages 357-398
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From page 357... ...
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.
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. Medicare-certified nursing homes also provide skilled, rehabilitative care to individuals following an acute-care hospital stay (Harris-Kojetin et al., 2019)
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. 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)
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. The Medicare Payment Advisory Commission has found nursing homes have continued to make double-digit Medicare margins under the PDPM (MedPAC, 2020)
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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)
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From page 362... ...
. 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 characteris tics subject to certain limitations.
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BOX 7-1 Family Member Perspective "My mother had a private room because she paid out of pocket, spending the last $200,000 of my parents' lifetime savings before depleting her bank account. One more month, and she would have gone on Medicaid." -- Daughter and caregiver of two parents with dementia who needed nursing home care This quote was collected from the committee's online call for resident, family, and nursing home staff perspectives.
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, 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.
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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.
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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)
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From page 367... ...
11 In contrast to diagnosis-related group payments, which pay for hospital stays using a prospec tively 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)
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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)
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. 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.
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. 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)
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, 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)
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. (See Chapter 9 for discussion of health information technology in nursing homes.)
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. Accountable Care Organizations The other common APM implemented in nursing homes is an accountable care organization.
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. 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.
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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)
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. 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)
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. 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)
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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.
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. 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)
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. 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.
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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)
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. 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)
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. As a result, a federal benefit system would provide broader access to nursing homes and other long-term care services.
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• 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.
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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.
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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)
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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.
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2019. Inclusion of nursing homes and long-term residents in Medicare ACOs.
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2015. Report to Congress: Alternative payment models & Medicare Advantage.
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2020. Changes in long-term care markets: Assisted living supply and the prevalence of low-care residents in nursing homes.
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2018. Assessing the quality of nursing homes in managed care organizations: Integrating LTSS for dually eligible ben eficiaries.
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2019. Nursing homes are closing across rural America, scattering residents.
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2015. Medicare Advantage mem bers' expected out-of-pocket spending for inpatient and skilled nursing facility services.
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2018. Medicare advantage enrollees more likely to enter lower-quality nursing homes compared to fee-for-service enrollees.
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2017. Why glaring quality gaps among nursing homes are likely to grow if Medicaid is cut.
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2021. Addressing systemic racism in nursing homes: A time for action.
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2013. The effect of pay-for-performance in nursing homes: Evidence from state Medicaid programs.
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2018. Hospitals using bundled payment report reducing skilled nursing facility use and improving care integra tion.
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