The Centers for Medicare and Medicaid Services' Nursing Home Case-Mix and Quality Demonstration

Abstract

This paper presents the first comprehensive account of a major national demonstration designed to integrate skilled nursing facilities (SNF) prospective case-mix payment and quality of care. It describes the Centers for Medicare and Medicaid Services' Nursing Home Case-Mix and Quality (NHCMQ) Demonstration—the template for Medicare's SNF Prospective Payment System (PPS) implemented July 1998. The NHCMQ Demonstration provided the basis for one of the most significant changes in SNF reimbursement and quality monitoring policies to date. Prospective reimbursement policies created positive incentive for providers to admit Medicare residents under more equitable payment rates. However, controversy regarding unanticipated perverse provider incentives remains. The quality management system designed under the NHCMQ Demonstration is currently used in over 17,000 nursing homes. Furthermore, under the NHCMQ Demonstration, one standardized assessment tool—the MDS—was used to assess a resident's clinical condition, to monitor quality, and to calculate provider reimbursement. Experiences from the NHCMQ Demonstration and continued evaluation of the current national PPS, along with state systems, provide a rich information source regarding prospective, case-mix reimbursement, and provider incentives.