The small size and high year-to-year variability of the financial rewards and penalties offered by value-based purchasing programs for nursing homes likely undermined the program’s effectiveness.

These are the findings of a JAMA study released Wednesday, which measured the performance of the Centers for Medicare and Medicaid Services’ (CMS) VBP program for skilled nursing facilities (SNFs) in cutting hospital readmissions. The SNF VBP incentives are based on a nursing facility’s 30-day readmission rates for Medicare fee-for-service beneficiaries.

“This cohort study of the SNF VBP program found that financial incentives were small, with large year-to-year variability for individual SNFs. This may have limited the program’s ability to induce meaningful investments to reduce hospital readmission,” the researchers said.

The analysis included over 5.3 million qualifying SNF stays across 14,189 SNFs. Financial incentives – either bonuses capped at 3% or penalties at 2% – were calculated as a percentage of each facility’s Medicare revenue. These incentives were then compared to SNF net operating income.

The study’s key findings suggest that the median reimbursement adjustment across all SNFs and over the three years between 2019 and 2021 resulted in a reduction of $10,336, or 0.15% of average SNF operating income. In addition, the financial incentives were highly variable from year to year for most SNFs.

Total financial incentive across all SNFs was more than $571 million across the first three years, and two-thirds of SNFs received a penalty, including 28.4% of the SNFs getting the maximum penalty. That said, the impact at an individual SNF level was relatively small, the study stated.

“These findings suggest that the small size and high variability of incentives may have contributed to the relative lack of effectiveness of the SNF VBP program,” researchers noted, adding, “Initial evaluations suggest the program was not successful, and a key question is to what extent the size and distribution of the financial incentives may have played a role.”

The modest financial impact also helped explain prior findings showing that the SNF VBP program had no significant impact on key outcomes such as readmission, mortality, or community discharge rates, researchers noted. Previous research on the SNF VBP program focused on the first year of financial incentives, and those studies demonstrated that 72% of SNFs received a financial penalty.