Less Than 3% of Nursing Homes Received Maximum Rewards Under ‘Flawed’ Medicare VBP Model

The federal government’s sole attempt at linking nursing home Medicare reimbursements with outcomes is broken and requires an overhaul, the Medicare Payment Advisory Commission (MedPAC) determined.

The Skilled Nursing Facility Value-Based Payment (SNF VBP) Model has rewarded strikingly few facilities while the majority have lost money — though the amounts involved in either direction were likely not enough to actually drive the intended changes in behavior, MedPAC senior analyst Ledia Tabor argued during the group’s meeting last week.

“Few SNFs, between 2% and 3%, received the maximum increases,” Tabor said. “Those increases were relatively small, ranging from 1.6% to 3.1% net of the withhold. The general consensus is that these incentive payments have not been sufficiently large to motivate improvement.”


In addition, the VBP “winners” may have already had the conditions necessary to succeed under the program relative to their peers.

“We also found that incentive payments tended to be higher for larger providers, for providers whose patients had lower risk scores, and for providers that treated fewer patients at high social risk, as measured by share of fully dual-eligible beneficiaries,” Tabor said.

“Dual-eligible” refers to residents who qualify for both Medicare and Medicaid, a group of older beneficiaries who typically have more complex health issues and lower access to primary care and other social determinants of health.


Under the SNF VBP program, nursing homes automatically lose 2% of their Medicare reimbursements; they can win that figure back, along with a potential bonus, for reducing resident rehospitalization rates. The system has consistently generated far more losers than winners, with MedPAC finding that about three-quarters of SNFs saw reimbursement drops over its three years of existence.

“Between 21% and 39% of SNFs earned back essentially none of the amount withheld, which was 2%,” Tabor observed.

The MedPAC report confirms a growing body of research suggesting that the promise of rewards — or threat of losses — under VBP isn’t enough to move the needle significantly in either direction. In fiscal 2019, for instance, winners logged an average reimbursement boost of $21,000, according to a January analysis published in the journal Health Affairs.

That probe found several factors associated with VBP success, including non-profit ownership and higher levels of registered nurse (RN) staffing. But it’s unclear whether investment in advanced practitioners would actually pay off for providers, the study noted.

“Substituting lower-skilled clinical staff for RNs, although cost-effective to SNFs, may lead to poorer performance in the SNF VBP Program and potentially worse outcomes for residents,” the researchers noted. “It is unlikely that SNF VBP incentive payments alone would fully offset the increased costs associated with adjusting the staff mix.”

Former Centers for Medicare & Medicaid Services (CMS) administrator Seema Verma criticized the fact that only 2% of nursing home payments are associated with outcomes in an op-ed published shortly before the end of the Trump administration.

“Outcome-focused payment must be paired with outcome-focused regulations,” Verma wrote. “Facilities certainly must be held accountable. They, after all, are ultimately responsible for a resident’s care, but they should be held accountable for the right things; the level of infectious disease in a home is a better measure than the number of months a facility keeps paperwork on file.”

Federal legislation passed in December 2020 made a few tweaks to the program, MedPAC observed, including the potential expansion of allowable metrics and the exclusion of facilities that do not meet minimum volumes of data for each measure.

But Tabor, along with fellow MedPAC commissioners Carol Carter and Sam Bicker-Barlow, suggested that Medicare develop a more comprehensive VBP model for SNFs known as VIP — for “value incentive program.” That system would incorporate hospitalizations, successful discharges, and Medicare spending into a more complex performance metric, while also increasing the risk and reward factor to 5% of Medicare reimbursements. Unlike VBP, VIP would also make all of the money available as bonus cash; the current system skims some off the top as general Medicare savings.

Such a model would additionally include publicly available patient experience metrics, Tabor said.

“Beneficiaries may experience an improvement in the quality of care they receive from providers because SNFs will have an incentive to improve patient experience when these measures are publicly reported and scored in the SNF VIP,” she said. “Consumers will have more information about providers when making decisions about where to get care.”

MedPAC will formally vote on the recommendations in April; the non-partisan group advises Congress on Medicare issues, but lawmakers are under no obligation to follow its recommendations.

“In summary, the current program is flawed. The VIP design addresses these flaws,” Tabor concluded. “Compared to the current program, a replacement VIP design is more likely to motivate providers to improve their quality and would dampen the incentive to avoid beneficiaries with more social risk factors and more medically complex beneficiaries.”

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