CMS Urges States to Tie Nursing Home Medicaid Payment to Quality

CMS is pushing for more value-based reimbursement, this time for nursing home Medicaid payment.

The federal agency has sent an informational bulletin to states urging them to tie Medicaid payments for nursing home services to quality outcomes. The push is part of the Biden Administration’s effort to reform nursing home care by holding providers accountable for the care they deliver.

Tying nursing home Medicaid payments to quality measures will improve patient outcomes and safety, as well as advance health equity, according to CMS. Value-based Medicaid reimbursement will also ensure nursing homes are adequately resourced and staffing—a top priority for the Biden Administration.

“Today’s action is an important step toward accomplishing the Administration’s goals of strengthening the quality of care, accountability, and transparency in our country’s nursing homes for Medicaid enrollees,” CMS Administrator Chiquita Brooks-LaSure said in an announcement today.

“States can implement a number of initiatives described in this guidance immediately. Medicaid enrollees residing in nursing homes will only experience better care through collaboration between states, CMS, providers, and other partners, and we look forward to working closely with them on this important effort,” Brooks-LaSure continued.

The COVID-19 pandemic highlighted substandard conditions at nursing homes, which care for many of the most at-risk patients in the country, according to the White House. Notably, over 200,000 nursing home residents and staff have died from COVID-19, representing over a quarter of COVID-19 deaths in the US.

The Biden Administration released a set of nursing home reforms in February 2022 to improve patient safety and quality of care. The reforms aim to ensure every nursing home has an adequate number of staff who are trained to provide high-quality care and to hold poorly performing nursing homes accountable for improper and unsafe care, the Administration says.

Additionally, the Administration aims to give the public better information about nursing home conditions so they can choose the best option for themselves or their loved ones.

Medicaid is key to achieving the Administration’s goals for improving nursing home care, CMS said in the bulletin. The agency reported that 2 million Medicaid beneficiaries have received institutional services since 2019.

States have the authority to update their approach to long-term care reimbursement under the Social Security Act, which also provides states with the flexibilities to establish Medicaid base and supplemental payments that provide performance-driven nursing home rates, CMS explained.  

The agency suggested that states implement initiatives immediately through the Medicaid state plan, waiver, or demonstration process that link payment to quality measures, such as resident room occupancy. Medicaid programs could also give higher payments to nursing homes that place Medicaid residents in single-occupancy rooms.

“Whether integrated into the base rate or established as a separate value-based payment program, these efforts link payment to improved health care quality and shift from a focus on volume to value,” the bulletin stated.

CMS also advised states to increase nursing home accountability by leveraging federal and state data, which CMS has increased under new reporting requirements, to advance oversight of local facilities. Some states already do this by using the CMS Nursing Home Five-Star Quality Rating System as part of their calculation of bonus payments to nursing facilities.

“States may also develop incentives to encourage provider participation in Medicaid-specific quality improvement activities based on state-developed program goals,” CMS said.

States should also look at their data to develop metrics that can incent nursing homes to ensure adequate staffing, the bulletin added. States can also include the costs for training staff in the payment rate for Medicaid services.

Nursing homes are already required by the federal government to maintain minimum staffing requirements under the Biden Administration’s plan for nursing home reform. Linking Medicaid payment to staffing measures would strengthen the government’s efforts to improve nursing home staffing, CMS stated.

“CMS is committed to working in partnership with states to develop payment methodologies that address initiatives to improve health care quality and equity in the Medicaid program. CMS encourages states to utilize the flexibilities available to support the provision of high-quality care to residents of nursing facilities,” the bulletin concluded.

UPDATE 08/23/2022: The American Health Care Association/National Center for Assisted Living (AHCA/NCAL) released the following statement via email regarding CMS' bulletin:

“We appreciate CMS’ announcement today—we have long backed reimbursement programs that support and incentivize long term care providers to further enhance the quality of care delivered," said Holly Harmon, Senior Vice President of Quality, Regulatory & Clinical Services. "First and foremost, Medicaid needs to fully fund nursing homes for the actual cost it takes to care for residents. Too many states fail to meet this baseline, and as a result, nursing homes are struggling to compete for workers and keep their doors open. We look forward to working with state and federal policymakers to continue to develop these quality-focused reimbursement programs.”