Dec 01, 2019

Rewards and Risks of Value Based Reimbursement

by Steve Katz

The Nursing Home Reform Act initiated a journey for our industry twenty-three (23) years ago. The Balanced Budget Act of 1997 modified the way that journey is financed using tools that The Nursing Reform Act created.  It’s been a long road and in New York, we are finally reaching a significant stage:  rewarding quality in our reimbursement system.  Many in the industry asked for a financial incentive for high quality providers.  However, be careful what you ask for, the adage cautions us.  Value Based Reimbursement is coming to both Medicare and Medicaid, and it is the system that will pay for quality performance, but consequences remain for those facilities providing lesser care.

In pursuit of the goal to reward quality providers, Medicare and now Medicaid are using various criteria to evaluate the outcome of care.  They include the MDS for data collection purposes (quality and reimbursement), collecting and evaluating other data (staffing, annual survey) over the internet for efficient data transmission.   The foundation is now set to create the methodology to recognize quality in the NY Medicaid reimbursement system.

The NYSDOH Work Group with provider participation is constructing the new reimbursement system that will reward quality providers.  Medicaid will have a Quality Add-on that facilities in the top twenty percent (20%) from a quality perspective will receive.  The Quality Add-on appears to be based upon a formula that considers RN hours as a percentage of all Nursing Department Hours, key Quality Indicators for long term residents  ( % of Residents Who Have/Had a Catheter Inserted and Left in their Bladder,% of Residents with a Urinary Tract Infection,% of Residents Who Lose Too Much Weight, % of Residents Whose Need for Help with Daily Activities Has Increased,% of Residents Whose Ability to Move About In and Around Their Room Decreased) and Survey results.  The systems will evolve incorporating the Quality First initiative that the industry implemented as well as resident and family satisfaction.  It will also recognize facilities that have a significant improvement in their quality rankings from one year to the next.  The source of the funding for the Quality Add-on is the problem; zero sum systems are always a challenge.

This new Medicaid reimbursement system will be implemented on April 1, 2010.  This system will be budget neutral; the funding for the Quality Add-on will be a reallocation of existing funds within the nursing home Medicaid system.  NYSDOH and the Work Group reviewed data and linear regression analysis to adjust the Direct and Indirect components of the Medicaid rate.  As the dust continues to settle the reality is clear.  The ceilings will be lowered for both the Direct and Indirect components to create the funding for the Quality Add-on.  The process that is adjusting the ceilings is currently referred to as Regional Pricing.  However, that label may not remain applicable since NYSDOH is considering combining NY State Regions for reimbursement purposes.  As a result, it is clear that nursing homes will receive less in their Direct and Indirect component. If a nursing home is to keep its Medicaid reimbursement whole it must be in the top twenty percent (20%) in quality rankings.

The reductions in the Direct and Indirect components of the Medicaid rate are based upon new ceilings that are built around Regional Pricing.  Using linear regression analysis, the NYSDOH Work Group developed a new mechanism to redefine the ceiling for both the Direct and Indirect Components.  When implemented, Value Based Reimbursement will create enhanced pressures for nursing homes.  Quality is now more of an imperative than ever before, since the penalty will be a reduced Medicaid rate.  If a facility is not ranked in the top twenty percent (20%) for quality it will have to work harder to get there and reduce its expense since its Medicaid rate will be lower.  This challenge is enormous since the ranks of management are thin and where do you focus limited management resources?

While quality of care is always the primary goal of nursing facilities, there will always be a delicate balancing act between administrative and clinical management.  How financial resources are allocated affect clinical outcomes.  Saving money with poor supply choices can have devastating domino effects on labor as well as clinical consequences that cost the facility thousands of dollars.  Shaving labor dollars related to direct care can lead to a decline in clinical outcome, risking a vicious cycle of dwindling financial resources and declining ability to meet care needs.  Streamlining both clinical and business processes with the use of technology, real time financial reporting, and valued added strategic partnerships such as procurement specialists have become vital to LTC facilities in New York State.

While lobbying the legislature to prevent implementation of the new reimbursement methodology might seem to be a reasonable response, reassessments of facility allocation of resources, procedures and processes will bring a surprising level of relief.  Over the last fifteen years, Caretech has refined its procurement processes on behalf of its clientele, developed value added technological tools to facilitate greater efficiency and profitability, and provides a sophisticated analytical capability for facility managers.  Timely and relevant information are powerful tools.

Caretech developed a Value Based Reimbursement Risk Assessment to help a facility determine the impact of the new ceilings on their existing Medicaid rate.  Caretech can assist you with strategies and programs to reduce your supply expenses and provide you with a means to focus more intently on quality while enhancing your control over supply expense.  Now is the time to act and Caretech is prepared to assist you.