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Payment for Performance in Nursing Homes
By Arion Blas,
Global Action on Aging
August
11, 2008
Introduction
Many experts point to “payment for performance” as an answer to long term care’s lack of accountability. Using this system, the government can reward good performance and penalize noncompliance to its regulatory standards. Such a system, however, will only work if correct policies are put in to effect.
Current Payment Schemes:
Today, long term care providers get reimbursed from two major systems. First, fee-for-service systems pay providers for every visit and every procedure based on a fee schedule. Second, capitation payments, set at a fixed amount for every patient, got to every provider, regardless of the amount of care they’ve given. The former system promotes over-utilization, often resulting people undergoing unnecessary procedures. The latter system results in under- utilization as providers try to minimize care; providers ignore patients in the worst conditions to save money. In the long term care industry, the latter system also, often, encourages the use of life-prolonging machines to unnecessarily extend a patient’s life. This is done to maintain the ‘number’ of patients in an institution, allowing it to collect more money.
How Payment for Performance Works:
Payment for performance (P4P) is a payment system that many say will eliminate the inefficiencies found in long term health care services. It aims to promote high quality and safe health care through monetary incentives. But does it? The entire system can be divided into two parts: setting of benchmarks and performance appraisals.
A. Setting of Benchmarks
The paying party sets the performance measures, based on the outcome of the treatment. The aim of setting benchmarks is to standardize the quality of health care in nursing homes. The benchmarks also serve as criteria on which a provider can be judged.
B. Appraisal of Performance
The payee establishes the criteria on which it will be judged. The performance of a provider will have a corresponding payment amount. Those that perform better, based on the criteria, will receive financial incentives. Financial incentives can be given as bonuses or a merit-based reimbursement scheme. The former, as the name implies, is a financial ‘bonus’ provided when the provider achieves a certain result. Merit-Based schemes, on the other hand, are based on a sliding pay scale that may involve patient satisfaction and the environment in the criteria. This form of payment takes into consideration the method in which the goal was achieved.
P4P in LTC
The health care industry has tested P4P (Payment for Performance). The Leapfrog group, for example, has rewarded hospitals that achieved a quality health care. The group financially awards providers that exhibit desired standards while applying market pressure on those that do not. The group works with America’s largest health care purchasers, using market power to pursue its objectives. The organization also creates hospital surveys and ratings for consumers.
Potential Benefits:
1. Better Health Care and Service – Theoretically, P4P has the potential to increase the quality of health services. Providers will be forced to attain higher levels of quality, addressing the problem of physician autonomy and the need for accountability in health care. Studies indicate that P4P has resulted increased visits to doctors and preventive screenings. More importantly, it may address in the great variation in treatments for the same diseases and symptoms amongst doctors.
2. Lower Costs – P4P proponents have claimed it had the capacity to lower costs. Both providers and consumers, because of the criteria provided, tend to focus more on what elements drive costs. They think that this process will lead to greater use of technology, resulting in efficiencies.
P4P is a promising scheme that is practiced in the private sector. However, most of the trials are based on physician-patient situations. Long term care, especially nursing homes, presents a different challenge.
First, LTC is more labor intensive. The need for health aides and nurses are significant cost drivers in a nursing home. Furthermore, costs are not only incurred with basic medical care but also with social activities.
Second, it is difficult to measure outcomes with nursing homes. This is especially true with patients who are very weak. Typical measurable outcomes such as the number of patient deaths may not be applicable.
Concerns about P4P
Potential Problems
1. More legislation is required to allow the system to work. Transparency within the system must be made compulsory. Patients must be informed of the services that they ought to receive. Likewise, institutions must be banned from “creaming,” or refusing to admit very sick patients. It is also likely that the private for-profit sector will pass on disincentives and costs to the patients by increasing their prices. Laws should be passed to limit price increase in these places.
2. Increasing bureaucracy may lead to inefficiencies and moral hazards. In doing so, the government ends up with bigger costs.
3. Complexity of regulatory standards, procedures and policies will make LTC inaccessible to people. It may become harder for old people to enroll themselves and to find appropriated service for them. Much worse, policies may be used to cover-up elder abuse cases.
4. P4P could render more harm as providers work to fulfill the set criteria and neglect other important patient care. It is impossible to create regulatory standards to cover all aspects of LTC.
5. P4P may marginalize institutions that provide vital care in many depressed areas. The outcome in these institutions may not always coincide with all regulatory standards, yet they provide important health care in these areas. More importantly, pay for performance may compromise any improvements to ailing institutions due to de-funding.
6. Innovations may be discouraged in the hope to maintain high ratings with the P4P system, placing the small medical practitioners at a grave disadvantage. Very likely, large institutions with lobbying power will benefit most from this system.
7. Record keeping is key to the system. However, the P4P contains little room for verifying reports or claims.
P4P may be a good alternative to the current systems of payment employed by the government. It may promote much needed accountability in the health care sector. Many for profit institutions will be forced to scale back on their cost-cutting measures, ensuring that patients will get more care.
However, it may not provide the cost cutting benefits that it claims. Major costs will be incurred in setting up the system, including establishing third party policy regulators, government offices and information dissemination. Dismantling the old system is also likely to meet opposition from many for-profit institutions which benefit from it.
Alternatives
As promising as P4P may sound, it is also important to consider alternatives. Informal networks take on importance in Long Term Care. It is estimated that if the government were to take over all the services provided by informal network, it would cost over $300 billion – almost three-quarters of that spent on Medicare. Informal networks should be supported and promoted, not only because it is free, but because it also promotes intergenerational interactions and friendships. In many cases, these networks are neighbors who visit old people who live alone. Some gather every morning for simple exercises or free Tai Chi lessons in the parks. These work well in creating a society that embraces all ages.
Not for profit groups tend to provide formal, yet helpful, services as well. Faith-based groups and identity-based societies may provide specialized care that take into account cultural differences in the elderly. This is especially important with the migrant community. More importantly, since such groups exist for the welfare of those they serve, the problem of cost cutting observed from the private sector can be avoided.
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