DMAS P4P Report Released

VHCA (12/14/2007)

The Department of Medical Assistance Services (DMAS) has issued its report on a Pay-for-Performance (P4P) program for Virginia nursing facilities. The DMAS proposal is consistent with recommendations of the Governor’s Health Reform Commission and also reflects the desires of the Pay-for-Performance Advisory Committee.

Health care payers are increasingly including quality of care metrics as one of the criteria used in reimbursement methodologies.  This “value-based purchasing” movement links pay to performance.  A number of state Medicaid programs are developing pay-for-performance programs for nursing facility reimbursement because Medicaid is the largest single payer for nursing facility care.

DMAS believes a quality incentive program has the potential to have a major impact on the quality of care for all nursing facility residents.  The report indicates that DMAS recommends that a P4P program be implemented in three phases:  development, public reporting and pay-for-performance.  Development of a P4P methodology would take place through the end of calendar year 2008.  From January 1st through July 31st of 2009, the Department would continue with the development phase and would also conduct a Public Reporting Pilot.  Beginning July 1, 2009, the program would move into operational status with providers receiving quality incentive payments.

The report indicates that the quality criteria upon which the P4P program will be designed include Quality Indicators, Resident Quality of Life, Staffing, Survey Deficiencies and Avoidable Hospitalizations.  The staffing component is likely to focus on satisfaction and stability/turnover criteria and will not be based upon designated staffing levels.  As to survey outcomes, DMAS has indicated that the final program design will likely include criteria that are limited to no more than 10% of the overall quality criteria weighting.

The report indicates that the Department is committed to further efforts to develop a measure of avoidable hospitalizations.  Additionally, the report states that DMAS will continue to research other criteria, particularly criteria that reward innovation, modernization and culture change in furnishing resident care.  The Advisory Committee and DMAS believe that additional work is necessary to develop and test quality indicators. 

Implementation of a nursing facility pay-for-performance program is expected to require additional resources for data collection and calculations, employee and resident/family surveys, public reporting and overall program coordination.  DMAS recommends that it procures through a competitive bidding process a vendor to develop, implement and manage a tiered nursing home reimbursement system. The contractor would design a turnkey solution based on the recommendations contained within the report and in consultation with DMAS and the Advisory Committee.   MyInnerview, a company that many VHCA members already utilize for quality measurement and improvement tools and resources, is serving in the role of contractor to two states with new Medicaid pay-for-performance programs.

The Health Reform Commission has recommended that the program be voluntary.  A successful program, however, needs to have broad participation.  Participation depends on incentives.  To the extent that the program relied on the submission of new data, this incentive helps offset any incremental cost to nursing facilities.  A participation incentive, if utilized, would most likely be phased out after the first year.

In order to increase transparency between consumers and nursing care facilities, efforts should be made to publicly report performance scores collected through the pay-for-performance initiative.  The report also recommends public reporting as one of the implementation phases.  A yet-to-be developed report card will be used to test the criteria and the scoring.  DMAS recommends that the report card be in place for at least six months prior to beginning the P4P phase.
As to the budget implications of the proposed plan, administering a nursing home pay-for-performance program, especially during development and the first few years, will require additional administrative resources.  DMAS recommends a total of $762,834 in administrative funds for this program in FY09.  If there is a participation incentive, DMAS recommends a participation incentive of 25 cents per Medicaid bed per day or $1.5 million in FY2009.  DMAS estimates that a nursing facility with 100 Medicaid occupied beds would receive $9,000 annual increase in reimbursement as a participation incentive for one year. 

With respect to the actual payment of quality incentives, in the first year DMAS recommends a quality incentive pool equal to 1% of base reimbursement in the prior year, equivalent to $10.8 million in FY09.  VHCA, along with other provider representatives to the Advisory Committee, recommended a minimum of 3% of base reimbursement as an effective quality incentive program.  Assuming that the quality incentive pool is distributed semiannually and the program performance period starts on July 1, 2009, approximately $5.4 million in funding will be needed in FY10 at the 1% DMAS recommendation level. 

On Monday, December 17th, Governor Kaine will introduce his proposed 2008-2010 budget for the Commonwealth.  Once available, we will be reviewing the budget proposal to determine if the funding necessary for the P4P program implementation is included and will report the status to you early next week.

The full DMAS Pay-for-Performance report is available for download.