Pay-for-performance coming to nursing homes

The Centers for Medicare & Medicaid Services (CMS) is kicking off a five-state pay-for-performance (P4P) demonstration project that will help them design incentives for quality improvement in nursing homes. They’re calling it Nursing Home Value-Based Purchasing.

Arizona, Mississippi, New York, and Wisconsin have been chosen to be the host states. All nursing homes in these states were invited to participate and had to apply by May 1, 2009. Award letters are expected to be sent to 50 selected nursing homes in each state around the first week of June 2009. The demonstration is scheduled to begin in the summer of 2009 and last three years.

Basically, how the demonstration project will work is over the next couple years CMS will collect quality data on participating nursing homes, assign scores based on performance, and compare those scores to other nursing homes in the state overall and over time.

CMS will determine how much money is saved as a result of nursing homes’ improvements and then allocate those cost savings to the best-performers in the form of incentive payments.

However if it is determined that nursing homes in a particular state did not improve overall, no incentive payments will be disbursed … no matter how well a particular nursing home performed.

Even if you’re not participating in the demonstration project, you can still benefit by learning more about it. If the program is successful, it will be expanded to more states and participation will likely become mandatory. Understand the quality measures used and identify areas of improvement for your facility now so you’ll be ready. This will give you the advantage of extra time that your competitors might not have had.

For more information about the demonstration or the quality measures used, visit

Barbara O’Connell is Co-founder and partner of, LLC, which provides free healthcare quality and satisfaction information to consumers and low-cost marketing and patient satisfaction solutions to healthcare providers including nursing homes, assisted living communities, and more.

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