Think Tank

Payment Plan for Nursing Homes Raises Concerns

California is embarking on a campaign to improve the way patients are treated in nursing homes.

The state is developing a plan to link $40 million in Medi-Cal rate increases to standards of care in nursing homes. Higher Medi-Cal payments, scheduled to start next summer, would be awarded to nursing homes receiving top marks in several categories, such as nurse-to-patient ratios, minimizing physical restraints and preventing bedsores.

State officials also propose setting aside some bonus money for nursing homes that don’t meet standards but have shown dramatic improvement.

Some patient advocates say the proposed standards aren’t high enough. Others say the state must also include punitive measures for nursing homes that fall short. Others worry that the financial rewards may be paid out without actually improving the level of care in California’s nursing homes.

In addition and related to the Medi-Cal rewards program, state officials will be dealing with other facets of nursing home oversight. A health care budget trailer bill signed by Gov. Arnold Schwarzenegger (R) included the reauthorization of AB 1629, which details oversight for the state law that requires nursing homes to maintain minimum staffing and spells out penalties if they don’t.

We invited experts to weigh in on how stakeholders, including providers and state officials, should interpret and implement these new regulations aimed at improving care in California’s nursing homes.

Officials from the California Department of Health Care Services declined to participate, saying the timing was not good. They plan to unveil the specifics of their Medi-Cal reimbursement plan “sometime shortly after Nov. 30.”

We got responses from:

Californians in Nursing Homes Deserve Better

In 2004, we asked this question about AB 1629: Since the stated purpose of the bill is to improve care for nursing home residents, what evidence exists that AB 1629 will produce that effect?

No study, data or survey supported the revamp of the nursing home reimbursement system. We predicted that it would benefit only nursing home operators. Six years later, credible research shows that care has not improved and wages have not increased much, but because of AB 1629 the state now pays one billion dollars more per year on nursing homes ­– one quarter of that from the general fund — even as the number of people in nursing homes has declined.

Our 2010 investigation of abuse in California nursing homes revealed critical issues. In a startling re-write of history, some AB 1629 proponents say that it was never intended to improve quality, despite clear language in the bill stating that intent.

State officials now acknowledge some shortcomings of AB 1629, but in a sad parallel to 2004, their 2010 response includes another unproven plan, a “pay-for-performance” system.  We’ve asked officials of the Departments of Public Health and Health Care Services the same question we asked in 2004: What evidence exists that this will produce better care? We have received no answers.

A 2009 article in the Journal of Health Care Financing Review contended that information on the impact of pay-for-performance programs is lacking in the nursing home setting. This literature review (1980-2007) identified 13 prior examples of pay-for-performance programs in the nursing home setting: seven programs were active as of 2007, while six had been terminated. The programs were mostly short-lived, varied considerably in the choice of performance measures and pay incentives, and evaluations of the impact were rare.

In 2004, Bruce Vladeck, former Administrator of the Health Care Financing Administration (predecessor agency to CMS), described pay-for-performance as “the kind of seductive focus group-tested catch phrase that has come to dominate health care policy discourse but is largely devoid of real content.

CMS is in the midst of an experiment using pay-for-performance in Medicare payments in nursing homes in several states. Why does California have to move ahead with yet another untested, unproven nursing home payment scheme — one in which nursing homes found liable for the abuse, neglect and deaths of residents could be eligible for bonus payments? The 100,000 Californians in nursing homes deserve better.

We Can't Afford To Waste More Money for Poor Performance

Excuse us if we are leery of Medi-Cal’s latest scheme to reward nursing homes. We’ve been down this road before.

Back in 2004 when AB 1629 established a new Medi-Cal rate system, nursing home and Medi-Cal officials claimed the system would improve care and accountability while saving the state money. None of these promises came true.  Annual Medi-Cal payments to nursing homes increased by over $1 billion and operator profits soared, but overall care did not improve and in many cases got worse. California Watch reported in April 2010 that hundreds of nursing homes cut staff, paid lower wages or staffed below minimum standards despite the increased funding.

These findings prompted Medi-Cal officials to admit that the rate system “has no tangible mechanism for financially incentivizing, rewarding or penalizing SNFs — skilled nursing facilities — for the overall quality of care rendered to their residents.” The Schwarzenegger administration responded by calling for a “pay-for-performance” system. Notwithstanding the catchy slogan, the new system promises more of the same.

The plan allows nursing homes to receive and profit from their current payments, no matter how poor their care. It does nothing to ensure that nursing homes earn the $4 billion Medi-Cal already pays them each year. The performance measures only determine the amount of rate increases nursing homes receive.

Making matters worse, the plan ignores most key areas of nursing home performance. It doesn’t take into account inspection findings, citations for abuse and neglect, federal and state enforcement actions, or criminal investigations and prosecutions.  Nursing homes can qualify for bonus payments even if they discriminate against Medi-Cal beneficiaries, chemically restrain residents, and ignore their obligation to help residents return to their homes or other community settings when they are able and so desire.

Another sign of the plan’s misplaced priorities: nursing home operators can pocket the bonus payments instead of using them to improve staffing and care.

These are but a few of the plan’s problems. Like the current system, it won’t do much, if anything, to improve the lives of people living in California’s nursing homes.

On Nov. 8, 2010, CANHR and 32 other consumer organizations wrote state officials urging them to withdraw their proposal and start over. Given the budget crisis and cuts to other vital long-term care services, California cannot afford to waste more money rewarding nursing homes for poor performance. Nursing home residents deserve a better plan.

Quality Improvement Requires More Than Enforcement

The trend is unmistakable. The latest findings from the Office of Statewide Health Planning and Development show significant improvements in skilled nursing facilities in the areas of staffing, immunizations, the use of restraints and the rate of pressure ulcers during the last four years following passage of a landmark law in 2006 that stabilized Medi-Cal rates for the skilled nursing profession.

Even with these advances, the California Association of Health Facilities, working on behalf of approximately 75% of the state’s licensed, free standing skilled nursing facilities, strongly supports the concept of financially rewarding facilities that make additional improvements in certain areas of care. It’s our belief that successful quality improvement efforts require more than enforcement actions. We favor a plan where payment incentives are easy to understand and designed to improve quality across the board, particularly among low performers.

Following negotiations with the Department of Public Health, the Department of Health Care Services and numerous meetings with stakeholder groups, CAHF agreed to forgo an anticipated Medi-Cal rate increase of 2.4% in 2011. Instead, the rate increase will be reduced to 1.4% with the savings used to establish the $40 million incentive fund. However, we do have some concerns about how the model is designed.

CDPH/DHCS needs to publish baseline targets for measuring quality indicators so nursing facilities can establish specific goals. In addition, the methodology should weigh all of the quality indicators equally. By creating a framework that “raises all boats,” the system will benefit more residents.

As the recommendation is presently designed, points are allocated for improvements in certain categories. Staffing carries a higher weight value than other categories. California requires a staffing level of 3.2 nursing hours per patient day. The average facility in California staffs at 3.57 nursing hours per patient day, well above the requirement. However, in order to achieve the bonus payment, a facility would have to staff above the 3.57 average, eliminating many facilities from qualifying for the bonus payment. If the goal is to raise the bar for as many nursing facilities as possible, this approach has the unintended consequence of awarding bonus payments to facilities that are already exceeding state standards. While important, staffing itself is not the only indicator of quality care.

With a fixed goal in place for each of the five quality indicators, nursing facilities will be able to quickly determine where they can make immediate improvements and where they need to focus more attention over time. And with the resident’s voice being heard through customer satisfaction surveys, we can begin to better address not only quality of care, but quality of life.

Small, Tentative Step in Right Direction

Using the state Medi-Cal reimbursement process to bring about change in the quality of nursing home care has been a complicated and contentious issue for many years. We at the Congress of California Seniors have been actively engaged in this effort for well over a decade. We supported the reforms included in AB 1629, which, in 2004, dramatically changed the way nursing homes are funded. The state went to an institution-specific payment method that  changed incentives and used fees on nursing homes to increase funding by several hundred million dollars per year. After years of watching the resulting changes, we are convinced that the reforms made some improvement in a troubled industry, but they did not create the kind of fundamental change we hoped for.

New efforts to tie increased funds to improved quality (a system known as pay-for-performance) are welcome but we have some major concerns:

  • The amount of new funding may not be sufficient to bring about significant change in behavior.
  • The state may have created a reward system that puts most of the new money into facilities that are already providing the highest quality care … ignoring the need for targeted funding to get many lower performing facilities to significantly increase quality.
  • The measures of “quality” are fairly narrow and limited and may lead to changed care in some narrow areas (which are being measured) but not lead to some of the broader culture changes needed in many facilities.

We need to find the right balance between rewarding the very best facilities (which may serve very few low-income Medi-Cal patients) and encouraging the facilities that need to have incentives to significantly improve care. One thing we have learned is that a punitive, penalty-focused funding system does not lead to better care. Just like low performing schools, cutting funds for the low performing nursing homes only puts patients at greater risk. We also need to do the research to determine what it actually costs to provide quality care in California’s expensive urban areas. None of our funding mechanisms are tied to research showing what drives good care and how much that costs.

California’s economic and revenue problems mean that we have very little to invest in better care. The reforms being proposed are a step in the right direction, but a small and tentative step. And we still face the daunting task of rebalancing our long-term care system spending to provide the level of community-based care that the public is demanding.