Why Additional VBP Funding for Nursing Homes May Be More Trouble Than Gain

Nursing home operators participating in a value-based purchasing program (VBP) might be able to derive greater benefits in coming years from higher scores based on new measures, as the federal government seeks to reward organizations who prioritize health equity, among other factors.

Joel Van Eaton, EVP of post-acute care regulatory affairs and education at Broad River Rehab, said that the Centers for Medicare & Medicaid Services’ (CMS) final rule grants more funds tied to health equity and based on the number of dual eligible residents enrolled as well as other qualifiers. And, in 2027 CMS also plans incentives for facilities participating in randomly selected audits to validate the data that’s assessing VBP measures.

But whether these changes are motivating enough for facilities to participate remains to be seen.

Brian Ellsworth, VP of public policy and payment transformation at Health Dimensions Group (HDG), told Skilled Nursing News that the increase in incentives is welcome, but may be a wash when operators consider the slew of additional measures to be added in the coming years and shifting payor structure in the space.

Will it make a difference?

The roughly 10% increase in paid funds, or about $46 million if we were to calculate an amount in 2024, is “nothing to sneeze at,” said Ellsworth, but the bump in funds seems like a modest gesture too far into the future.

“It takes a lot of time and investment for providers to create systems of care and upgrade their technology, all while contending with workforce shortages,” said Ellsworth. “Incentives need to be meaningful to drive behavior. My sense of these incentives is, they’re more of a symbolic nature.”

While CMS is adding some funds several years down the line, they are also adding additional metrics beyond rehospitalization, potentially further diffusing the already fairly weak incentives at present, he said.

MedPAC and other associations have said the VBP program is too narrowly focused and funding levels too modest, a critique further compounded by Medicare Advantage rapidly becoming a majority payor, Ellsworth said.

Medicare Part A, he said, by 2027 will likely be a minority payer in terms of total Medicare payments – it will have a lesser impact.

“The question that remains is if anybody’s going to be motivated to change their behavior based on a whole series of measures going into a calculation that is only for a payor, Medicare Part A, that is becoming an increasingly smaller payor in facilities,’ he said.

And, managed care plans don’t always adopt the same VBP policies, he noted.

“One problem is that federal legislation dictates some of what CMS can do. The whole thing needs to be rethought, with simpler and clearer policies and with funding adequate enough to move the needle incentive-wise,” said Ellsworth.

Overall, Ellsworth wants to see policies better aligned with MA and state Medicaid programs in order to maximize incentives.

Changes to the VBP withhold formula

And aside from the additional new measures in the VBP program, operators will also see changes in the SNF final rule related to the 2% withhold formula for the program.

Previously, of the 2% VBP withhold, 60% max could go back to the operator as an incentive, while 40% was returned to a federal trust fund. Now, 66.02% can be regained by operators starting in 2027.

“[CMS is] going to have to increase that incentive to 66.02% in order to keep facilities that don’t achieve these health equity bonus points from from not receiving some of that 2% back and to be able to equitably distribute those dollars across facilities for each program year,” said Van Eaton.

Moreover, scoring methodology wasn’t actually applied during Covid years, Van Eaton said, since the pandemic would have thrown off VBP scores for facilities hit disproportionately harder by the virus.

Prior to the 2024 Final Rule, there was only one VBP measure which calculated hospital readmissions.

Essentially, CMS assigned every facility the same score to even the playing field, he said, for the one measure – hospital readmissions – already in place.

“By suppressing [hospital readmission measure] numbers, that resulted in all participants receiving an identical performance score, and an identical incentive payment multiplier,” he said.

Other ways to get incentives back, and VBP-linked audits

Additional points can be gleaned once everything is tallied up from VBP measures, Van Eaton said, a change to the original VBP formula. He referred to it as a “risk adjustment.”

If a facility performs in the top 66.7 percentile, or if there are at least 20% of residents with dual eligible status, additional points will be awarded, meaning more money back out of the 2% program withhold.

With what’s called the “underserved” multiplier, CMS can add points for facilities that serve a certain proportion of dual eligible beneficiaries. It’s a way for facilities to make up VBP points if they have a patient population that doesn’t meet criteria for certain measures being added.

“As we increase the number of quality measures, we increase the number of total points potentially that can be achieved,” said Van Eaton. “Depending on the number of quality measures that are being utilized each performance year, [risk adjustments are] intended as a way to recognize best performers and give others an opportunity to improve their scores as well.”

SNFs must have a minimum of 25 residents on average across all quarters during an applicable one-year performance period in order to receive a score on a measure, he noted.

On top of additional ways to get the withhold back, Van Eaton also mentioned an audit portion of the validation process for any MDS-based measure beginning with the 2027 program year.

“There will be 1,500 SNFs that are randomly selected for 10 chart audits each year to validate the data that’s populating or calculating the value-based purchasing measures,” said Van Eaton.

It’s possible SNFs will face penalties for non-response or not achieving a validation threshold, he said.