If Not Now, When?
by: Steve Katz
Over the last twenty years, the nursing home industry has faced significant challenges. In some ways this coming year is no different and yet in other ways it may be transformative and extremely difficult for many facilities in the industry. The changes focus upon quality, Medicare, resources to continuously improve quality and Value Based Payment Systems. Action taken now could determine fiscal viability and the capacity to deliver quality care, which will impact fiscal viability. The ultimate question that will be considered at the conclusion of this month’s Budgetwire is, if not now (and the “now” will be defined shortly), when?
The transformational journey began with the creation of the Nursing Home Compare portal on the Medicare.gov website. Outcome data was made available to potential admissions and the public in general. The CMS goal was for the market to use this data when choosing a nursing home. Researchers are evaluating the impact of this data on nursing homes. There are two notable studies presented in this blog for your consideration. The first study conducted by Castle, Liu and Engberg(1) , in 2008 (Journal for Health Care Quality, 2008; 30(2):4-14) analyzed outcome data for nursing homes posted on Nursing Home Compare. The question they considered was whether posting such data on the Medicare website had an impact on reported quality. The authors concluded that the Nursing Home Compare data had a positive impact on nursing home quality. It is also likely that some nursing home executives took the opportunity to benchmark their operations compared to their competitors and used the data to improve clinical outcomes. A recently published study shows that Nursing Home Compare has had a greater impact on the industry.
A research paper published in the November, www.ncbi.nlm.nih.gov/pubmed/21029093″>Journal Health Services Research (doi: 10.1111/j.1475-6773.2010.01197.x) by Park, Konetzka and Werner(2) consider the financial impact of Nursing Home Compare and improvements in quality. Dr. Park’s group looked at financial indicators for three years before (1999-2002) and three years after Nursing Home Compare was launched (2003-2005). Their evaluation considered over 6000 Medicare certified nursing homes (not including hospital based facilities). They reviewed several financial performance measures. The results of the study show that facilities that invested in quality and improved their outcomes that were reported on Nursing Home Compare improved their financial performance. They had better financial results compared to facilities that did not improve their quality, or those whose clinical outcomes got worse. The facilities that improved their quality reported net revenue that was $200,000 greater than those whose quality stayed the same and $900,000 more than those whose quality fell for the study period. The reason for improved financial performance is linked to their ability to attract more Medicare admissions. This study also revealed a significant challenge. Many facilities that did not improve their outcomes did not have the financial resources to invest in quality improvement initiatives. With the impact of the recession on further Medicaid cuts and Value Based Payment Systems on the horizon, this effect document by Dr. Park et al is chilling.
Here’s a scenario that builds on the Park study. The Rockefeller Institute’s latest review of tax revenue shows some improvement compared to earlier in the year. The good news is that tax revenues are slowly on the rise. However they have not recovered to pre-2008 levels. The projected NYS deficit will be somewhere between $8 and $14 billion for the next fiscal year. With the election of a new Governor, it is likely that the upcoming budget battle will be significant. Medicaid will continue to reimburse insufficiently, at levels much lower than actual facility costs. With ongoing problematic Medicaid reimbursement, the need for Medicare admissions continues to drive financial viability. However, the data suggests that unless facilities can invest in quality and improve their clinical outcomes, Medicare admissions will not grow as needed. These facilities will not be able to invest in quality, nor will they be able to improve their outcomes and increase their Medicare revenues. Waiting in the wings is Value Based (Pay for Performance) Payment Systems, which will make this situation far worse.
Value Based Payment Systems will recognize quality as a component that requires a payment adjustment. High quality providers will be rewarded. Since this payment system will be budget neutral, high quality performer’s adjusted payment will come from the penalties levied on the poor performers. Once again, the Park study raised concern. Facilities that are not able to improve quality today may be less likely to have the financial resources available to address clinical outcomes when Pay for Performance is implemented. While it is likely that the trade associations will work to amend this payment system so that it is less onerous, Health Care Reform requires Value Based Payment Systems. So now (I promised you that I would define “now”) what should a facility do to address this possible scenario and the forthcoming Pay for Performance Systems hurdles?
Quality is now the imperative. It is not just an ideal that the industry strives for; it is a financial necessity. Based upon the Park study, quality seems to drive Medicare admissions and Medicare drives financial performance. Quality will have an even greater impact on a facilities financial status when Pay for Performance is implemented. The challenge for facilities is how to maximize the resources that support quality outcomes? How can facilities improve their outcomes, now, before Pay for Performance is implemented. Part of the answer may be this: the smarter nursing home has a strategic partner.
Nursing home executives must reconsider how their facility operates and having Caretech as a strategic partner makes a great deal of sense. Caretech allows facilities to focus management attention on quality and redirect financial resources from back of the house operations to improving clinical outcomes. Our recently introduced purchasing dashboard real-time spending analysis is available to our Caretrak Partner Plus™ customers. This exclusive tool presents your organization with metrics on Key Performance Indicators that will lead to improved financial results. Executives possessing this vital procurement data will be well positioned to quickly act on emerging trends to improve clinical outcomes. A strong dynamic is created when the data is both timely and relevant. The new status quo necessitates that nursing home executives seek out an innovative strategic partner. Isn’t it time that you partner with Caretech? If not now, when?
 The Association of Nursing Home Compare Quality Measures with Market Competition and Occupancy Rates. Journal for Health Care Quality, 2008; 30(2):4-14.
 Performing Well on Nursing Home Report Cards: Does it Pay Off. Journal Health Services Research, 2010, no. doi: 10.1111/j 1475-6772. 2010.01197.x