Applying RUG-III for reimbursement of nursing facility care

Abstract

The Resource Utilization Groups (RUG-III) case-mix classification is becoming an internationally accepted methodology for determining payment for nursing facility and care. In this paper we discuss the key concepts of case-mix reimbursement and several different payment approaches based on RUG-III. In discussing the empirical evidence of case-mix reimbursement, we draw especially on the US experience. Clearly, the success of case-mix reimbursement depends not only on the payment design, but also on the ability to foresee market conditions and the regulatory environment in which the payment system is being implemented. Moreover, we demonstrate the need to develop a case-mix based reimbursement in Finland, where institutional long-term care is mainly provided by the public sector. Finally, we propose that developing financial reward systems based on quality and performance could be important additions to existing case-mix payment systems, as market mechanisms and government regulation of quality may not offer sufficient incentives to provide optimal care.