Why the Medicaid Battle is Leading to More Quality-Based Nursing Home Payments

In the midst of lagging Medicaid reimbursements, more nursing providers are pushing states to launch quality incentive programs that are designed to enhance care and reward high-performing long-term care providers.

Twenty-four states already have them in place, and the latest to join this trend is Pennsylvania. And to that end, nursing home providers in Pennsylvania are asking the state legislature for $100 million in funds towards its proposed quality incentive program. Known as the Enhancing Care With Incentivized Payments program (ECWIP), the program evaluates current data to measure key quality outcomes of resident care at each nursing facility. If providers meet or exceed the metric goals, they will be rewarded with additional funds to further improve care outcomes.

Although Pennsylvania’s program is different from programs across the nation, it nevertheless shares the aspect of holding providers accountable for the care they provide. Pennsylvania’s program ties care to quality measures (QMs), the number and type varying between states. Regardless, the motivation for such programs stems from an urgent need for funding – especially with what insiders call an “unfunded” federal staffing mandate on the horizon as well as low Medicaid reimbursements in many of the states that these quality incentive programs are being currently implemented.

“Nursing home providers … are grappling with insufficient reimbursement rates and rising costs, while trying to remain focused on delivering the best possible care to our most vulnerable residents,” said Zach Shamberg, president and CEO of the Pennsylvania Health Care Association (PHCA). “This is not a typical state budget request for more funding with no strings attached. This is not an ask for a handout.”

High-Medicaid providers are likely to have less revenue to invest in resident care because Pennsylvania’s Medicaid reimbursement rate falls short of the actual cost of care.

Those providers who fail to meet the mark, will also forgo a chance to get additional funding through the ECWIP. “This adds a whole new layer of accountability for state funding that should be allocated for the high-quality care of our loved ones and neighbors,” Shamberg said.

Pennsylvania’s program focuses on four key quality measures such as the percentage of residents with one or more falls with major injury, pressure ulcers, worsening activities of daily living, and perhaps more importantly given the staffing problems still facing the sector, thresholds for nursing staff turnover rate.

Multiple nursing home providers’ associations whose officials spoke to Skilled Nursing News said that these incentive programs maximize the well-being of residents alongside reducing health care costs.

Regional variations to the quality incentive programs

Several states – including California, Indiana and Ohio – are participating in similar programs to expand funding and enhance care. But there are variations related to each state’s reimbursement levels, occupancy thresholds and worker shortages, among other factors.

“It’s hard to make apples-to-apples comparisons to other state programs because of the specific nuances and rules of each program. No two states are the same, and each has unique rate-setting systems,” Shamberg told SNN. “Some states have focused their programs around specific projects or quality metric performance. PHCA has decided to focus on quality metrics that are directly tied to the overall well-being of residents and the ability of providers to manage and reduce overall health care costs.”

Meanwhile, Indiana has had a long running program tying quality to measures. “Indiana does have quality metrics as a part of their Medicaid reimbursement methodology and has for over 20 years,” Paul Peaper, president of Indiana Health Care Association (IHCA), told SNN. “These metrics are set by the state and are adjusted periodically. Our members support these initiatives and were supportive of a recent change to the quality program, which will further increase the amount of reimbursement tied to quality over the next 5 years.”

Other states have increased this funding too.

California’s longstanding state-funded quality incentive program that ended in 2022, whose support stood at $90 million annually, has since been replaced with a bolder new program with $280 million in support, according to Criag Cornett, president and CEO of the California Health Facilities Association (CAHF). California also rewards points for reduced turnover and based on if the facility is located in an area serving a high Medicaid-receiving population.

Ohio’s example

And state funding is higher for Ohio too. Ohio’s incentive program – launched in 2020 – is seeing fruits from the program emerge, according to Ohio Health Care Association’s (OHCA) executive director, Pete Van Runkle, who spoke to SNN. 

Based on the performance on key metrics, the maximum incentive SNFs can receive is $76.40 a day, he said, with the average being around $40 a day. “So it’s a pretty good incentive. And then the other piece, which is a little bit smaller, is a disincentive for providers to change ownership. So if you come in as a new operator, you lose the quality incentive for a period of time but it’s temporary.”

Ohio’s incentive-based approach – effective since Jan. 1, 2020 – uses different metrics from Pennsylvania’s proposed program, but it works. Ohio has assigned part of each SNF’s Medicaid funding based on performance on four CMS quality measures: pressure ulcers, ability to move worsening, catheters, and urinary tract infections. The system uses publicly-available CMS data and CMS-specified cut points, and the lowest-scoring group of providers gets no points for each measure. 

And overall, the statewide average for those four measures improved by an average of 34%. Ohio is now ranked within the top four states in three of the four quality measures.

Such success has led to its expansion.

The state added a fifth measure related to occupancy in July 2023. “We utilize the Medicaid cost reports and then give providers an opportunity to remove beds … from their license prior to July 1st in order to meet the occupancy standard, which is 75%,” Van Runkle explained. “We are planning other long-stay QMs starting July 1, 2024. But as of today, they’re not in effect,” Van Runkle told SNN.

Ohio will add additional measures come July, which will include adjusted total nurse staffing, antipsychotics use, falls with major injury, and decline in ability to perform activities of daily living. Ohio chose to factor in these additional measures, including staffing, because experience with the Medicaid quality incentive system shows that monetary incentives are effective in improving performance on the selected QMs, Ohio’s study conducted on the success of the quality incentive program shows.

In the last four years, Ohio nursing homes improved on all four of the four quality measures, moving from a ranking of 26 to 4 on the measure of the ability of nursing home residents to move, while its ranking for management of UTIs jumped from the ranking of 7 to the number one spot.

Ohio’s success was also noted by other states, including Pennsylvania, as they have proceeded to develop their own program. “As we began developing ECWIP, we researched other state programs and gathered stakeholder feedback. Ohio was one state we looked at. We used some overall principles from Ohio and other states, including the use of federal data, CMS cut points and an occupancy/efficiency metric,” Shamberg told SNN.

So like Ohio, occupancy levels are also a part of measures used to receive extra funding. The reason for this is that during the pandemic, many operators could not employ enough staff and took beds out of service despite the need.

But the need is “desperate,” said Matthew Maurano, CEO of Transitions Healthcare. And without additional funding, these beds will remain empty, he said.

States vying to add programs

For those Pennsylvania nursing home providers who helped create the ECWIP, there is a recognition that Medicaid simply doesn’t cover the expenses.

“The bottom-line is that Medicaid does not reimburse enough for the quality care we provide. ECWIP will deliver additional funds to help offset some of the Medicaid shortfall by rewarding us for all that we continue to implement in our efforts to further enhance care for our residents,” Maurano said.

An added win for providers is that the ECWIP program will not add to administrative burdens, Maurano said. “Most facilities are tracking that data now as required by a host of regulations regarding Quality Assurance already in place. The data is collected by the state and Federal Government through routing required assessments performed by our nursing staff,” he said.

If the state approves the $100 million in funds for the ECWIP, it will be paid out quarterly, although it is unclear how the funding will be structured and how much each facility will receive.

One thing is clear, however, and that is that no aspect of the quality incentives program in Pennsylvania whether the ECWIP or another smaller one funded by the Department of Health and Human Services (HHS) is funded by providers themselves.

“In Pennsylvania –– the state, not providers –– fund the current QIP, which is about $7 million dollars and is paid out annually. Providers could maybe see about $32,000 a year with this limited funding of $7 million in the current program,” a spokesperson for PHCA said.

All this is different from New York where any kind of quality incentive program is self-funded by the sector in which all facilities contribute to a pool of $50 million collected annually.

And so among states that currently don’t have such state-funded incentive programs, provider associations in Iowa and New York noted them as a viable option down the road.

“As Medicaid budgets face continued strain, it is crucially important for providers to conceive and advocate for programs which enjoin quality with reimbursement,” said Brent Willett, president and CEO of the Iowa Health Care Association (IHCA), who said that while Iowa does not currently have such a payment program, nursing home providers are “anxious” to get one started. “We support the design and establishment of a program which rewards providers who achieve high quality outcomes for their patients in Iowa, and expect future budget discussions pertaining to nursing facility Medicaid rate enhancements to contemplate such a program,” he said.