Pay For Performance

Pay For Performance, or Value-Based Purchasing

Is it Likely to Help Improve Quality Long-Term Care?

by: Arthur Y.Webb, Herbert H. Fillmore and Allison Silvers
special thanks to: Ellen Flaherty, PhD and Bob Zorowitz, MD

Introduction
Long-term care providers are caregivers to some of our society’s most vulnerable – adults with intermittent and progressive frailty, persons requiring continuing care who have no support network of their own, those living with HIV/AIDS and individuals with a variety of disabilities, temporary and permanent, who need someone to provide care and services for them. This is a tremendous responsibility that society has placed on providers, and expectations continue to rise regarding the level of care that is provided to this wide population in need. Long-term care providers have an ethical obligation to maximize the quality of care that is offered, providing the highest quality that can be sustained and thereby offering an environment conducive to healing body, mind and spirit, both of the individuals being served and their close relations.

Government, too, shares greatly in this obligation. Over the years, government overseers and payers have advanced a variety of quality efforts. Current thinking has focused efforts on pay for performance (also known as “value-based purchasing”). P4P, as it is sometimes called, can offer certain value, but the authors believe that, on its own, it cannot adequately guarantee quality, and, in fact, can create an environment where true quality can become secondary to the quest to satisfy performance measures required in order to achieve a monetary benefit. This paper reviews nursing home quality in a broader context, and recommends a two-pronged approach to build a self-sustaining quality long-term care system in New York.

Historical and
Manufacturing Perspectives
Long-term care is a field where quality, especially among nursing homes, has historically been uneven. In 1974, The New York Times launched its exposé of nursing homes in New York State, revealing both financial fraud and remarkably poor care in a number of facilities. These scandals led to adoption of rigorous regulations, as well as an active surveying process to ensure adherence to the regulationsa. Federal policymakers soon followed and issued similarly stringent regulations and surveying requirements in OBRA 1987.

Thus, over a generation ago, major efforts were underway to improve long-term quality-of-care. Yet, as was so perceptively stated in 1977 by Kevin M. Cahill, MD, Special Assistant to Governor Carey on Health Affairs:
“One of our most important health care challenges today is creating a definition of quality that will serve as a basic yardstick in the regulatory process. [The] perception of quality differs with the focus of the observer.”

The reforms of three decades ago wrought fundamental quality assurance efforts, which, rather than putting attention on outcomes, focused instead on the inputs to quality:
Leadership requirements
Assessments and record-keeping
Professional staffing requirements
Direct staff training
Physical environment

It’s important to note, that studies of OBRA have shown that this attention to inputs has indeed resulted in quality improvementb.

This approach of standardizing inputs to ensure quality outcomes is actually the cornerstone of Total Quality Management, brought into practice in manufacturing by W. Edwards Deming in the 1950s. Deming recognized that it is the system, not the people, that produces variation in quality, and therefore, efforts to ensure that the system is effective and in control lead to consistent quality outcomes.
The Institute of Medicine, in its seminal piece, “To Err is Human,” similarly recognizes that the variability that the health care system allows is the culprit behind medical errors, and that quality can be greatly improved by fixing system problems.

From Deming through the IOM report, the basic concept holds that quality is achieved when it is built into the system. In a manufacturing context, quality production relies on eliminating the sources of errors in the system: buying the right machinery and tools; keeping machinery and tools well-maintained; keeping the right parts in the right place; eliminating unnecessary hand-offs; training and empowering the workers to fix problems on the spot; and ensuring effective communication. Post-production inspections and quotas do nothing inherently to improve the inputs or the process. Manufacturers instead emphasize measurements of the inputs, infrastructure and processes, to assure they are appropriate and in control.

There is not much difference when applying this system quality control to nursing homes; in this case, “the system” comprises those inputs, structures and processes that ensure good clinical care and comfort to the residents, especially:


Collection of resident information
Communication of resident
information
Staff capabilities, qualifications
and training
Physical environment—including personal space, sightlines,
staff ergonomics
Leadership

The Value of Quality Investment
With stringent attention and investments in structure and process, long-term care providers, particularly nursing homes, have improved quality of care as a whole. Nonetheless, even in the face of great strides overall, quality still varies greatly. This can be seen as recently as 2005, when deficiencies cited in New York State nursing homes ranged from none to 36 with some considered “substandard quality of care.” A wide variation indeed.

To address the need for more improvement in quality, New York State has put forth and supported various initiatives, including the Nursing Home Quality Improvement Demonstration Program. This 2002 program reimbursed participating facilities for specific staff training, especially on empowering staff to communicate more effectively and to address concerns as they arise, both central themes of Deming’s Total Quality Management. As a result of this initiative, New York State has seen tremendous quality improvement. The state had ranked 32nd in its overall quality indicators on the federal government’s Nursing Home Compare website (found at www.medicare.gov) and now, with the exception of pressure ulcers, discussed below, ranks at Number 3.

The CCLC Quality Improvement Consortium, an 85-member subset of the Nursing Home Quality Improvement Demonstration Program, used Quality Improvement funds for staff training on pain management, improving communication and managing difficult resident behaviors. With this improved staff knowledge, all participating homes demonstrated improvement on all 15 of Medicare’s publicly reported quality measures!c

Another prime example of a quality investment that yields significant outcome improvement lies in the nursing home “culture change” movement. In brief, culture change flips the care concept on its head, making direct care staff core participants in clinical care instead of simply being the deliverers of a service, similar to how Deming promotes problem-solving for manufacturing line staff. As a result of culture change initiatives, notably the Wellspring Model and more recently the Greenhouses, key indicators of quality care—such as reduced deficiencies cited and improved resident and family satisfaction, as well as reductions in weight loss and reported pain—have been sustained.

It is clear that this attention to staff capabilities resulted in a dramatic improvement in quality outcomes. In other words, supporting improvements in structure and process does indeed result in outcome improvement, and for a broad range of providers.

From the perspective of a provider intent on continuous improvement, we can verify the value of structure and process investment. At Village Care of New York, for example, under the Quality Improvement Demonstration, two nursing homes (Village Nursing Home and Rivington House, a dedicated AIDS facility) received $1.9 million for additional investments, which was used for several key input and structural initiatives including:
Training all staff in the principles of “person-centered care” and direct care staff decision-making.
Training all supervisors and middle managers in leadership tools and techniques, improving communication among nursing home staff.
Training all direct care workers in gerontology and palliative care, improving their understanding of resident needs, and thus responsiveness,
Adjusting salaries to market standards, to improve staff satisfaction.

As a result of these capability and infrastructure improvements, the two nursing homes have not only achieved improvements on the CMS quality measures, but also achieved a deficiency-free survey and advances in resident satisfaction.

Moreover, the quality investment brought improved staff retention, and ultimately an increase in nursing hours per resident. Village Care’s front-line staff retention rate is now only four percent, one of the best in the state. Staff retention minimizes disruptions from integrating new staff, which would otherwise be a source of quality concerns. The conclusion drawn from this experience is that investment in recruitment and retention structures is an important driver of quality.

Value-Based Purchasing/
Pay for Performance
As the trend toward paying for outcomes spreads nationwide, New York State policymakers have become interested in, and have called for initiating, a value-based purchasing program for nursing homes. Value-based purchasing (VBP) rewards providers that achieve specific outcomes with enhanced reimbursement, and thus is a financial incentive approach to encourage providers to adjust their systems to achieve the desired outcome measures.

Payment for performance is not so new in health care. Flaws in the current fee-for-service system have been well-documented, especially the inherent incentive to deliver more services, rather than appropriate and coordinated care. Many health plans have already initiated outcome-reward systems for participating physicians, and Medicare is pursuing value-based purchasing for physicians, and soon, acute care hospitals.

VBP has a number of advantages. Most notably, payers and regulators do not need to prescribe specific structures and processes, nor continually inspect them, to encourage quality outcomes. Similarly, providers have flexibility regarding what inputs they use to achieve the desired outcome. VBP can also be implemented incrementally, providing all facilities with basic reimbursement to continue operations while they enhance their structure and processes. Finally, if the financial rewards are seen as substantive (although this is something yet to proven in physician care), a VBP system is believed to encourage investment in the structures and processes that lead to high-quality outcomes from a return-on-investment perspective.

This is not, however, a ringing endorsement of P4P efforts. In fact, there are major drawbacks to a quality assurance approach that relies on VBP. Deming, himself, was a critic of paying for specific outcomes, stating: “Pay for performance backfires every time. It is ruining us.”

Deming’s concerns focus on the inability of a pay-for-performance system to correlate actions with outcomes, and therefore would not be encouraging of sustainable quality systems. He pointed out that there is no solid proof that paying extra for quality results in improving quality. That lack of evidence continues today.

Some of the more significant concerns about using value-based purchasing in the nursing home world include:

Inability to adequately risk-adjust outcomes. There are too many variables in resident circumstances and from preceding clinical processes, with their resulting impacts—as well as their interactions—that are poorly understood. Therefore, it is possible to “punish” providers with high-quality inputs who have poor outcomes as a result of factors that are out of their control.
Too narrow a focus. The philosophy of care in many nursing homes has successfully, and arguably appropriately, changed to “person-centered care,” viewing the residents as holistic human beings, not as a disease state or entity. By rewarding providers only on, say, elimination of pressure ulcers, there is a risk of losing sight of the holistic care of the patient, encompassing mind, body and spirit.
Potential ability to “game” the system. With financial rewards at stake, consultants may become available to help facilities improve their outcome measures without necessarily improving their structures and processes. For example, outcomes can be favorably affected by admission and discharge policies and practices.
Opportunity Costs. With outcome measures tied to payment, resources would likely be directed to careful collection of outcomes and risk-adjustment measures. The impact of this could be a reduction of resources available for direct care. Resources, already scarce in many nursing homes, would be re-directed from those activities that improve quality-of-life, but which do not result in the desired outcome measures, in the rush to achieve P4P goals.
Sustainability. It is questionable that value-based purchasing leads to changed structures and processes that support built-in quality. New literature indicates that over time, outcomes are not sustainable. There are also questions on what is ultimately rewarded: quality or cost-containment.
Equity. Value-based purchasing financially rewards institutions that function well, and financially punishes homes that, for many reasons, are struggling. Reducing resources available to struggling nursing homes—the majority of which care for minorities and those who are most impoverished—can further jeopardize the care for those residents. One could look at pay for performance another way—that we’re not paying providers more for doing that which they are supposed to do in the first place, we’re really paying less to those who don’t make the grade. Looked at from that perspective, it’s a counterintuitive approach where the “rich get richer and the poor get poorer.” There must be a better way to help out struggling nursing homes without “punishing” them. This may be the biggest weakness in value-based purchasing.

To make matters worse, a significant drawback in VBP is that nursing homes exist within a Medicaid payment world where costs are typically under-reimbursed. For example, Village Care’s geriatric nursing home has a Medicaid rate of $220 a day while the actual costs of care exceed $250 a day. It’s been documented by the New York Association of Homes and Services for the Aging that about half of New York’s not-for-profit nursing homes operate at a negative margin. Re-distributing what is already too small a pool of money, and one that is poorly allocated in terms of its overall sufficiency, no doubt will have unintended negative consequences on providers caught in the pay-for-performance competition.

Thus, given the success that a “structure and process” methodology has achieved to-date, and given the potential drawbacks of VBP, there needs to be a coordinated approach, one that first builds the quality infrastructure and then, if necessary, targets specific improvements through VBP incentives. Such an approach is consistent with a policy that is in the “public good.” As a public good, the State must do more than pay for performance—it must first help providers build and understand the capabilities necessary to provide quality care. Advancing the public good includes building the infrastructure and inputs required to ensure quality, as well as identifying and disseminating “best practices.”

Quality Investments Needed
There are still profound structural and process investments necessary to build the nursing home quality foundation, and quality improvement investment is still needed. The chart on the following page examines skilled nursing facilities’ major structures and processes, showing what is in place, and what needs to be attained.

Ongoing “Quality Improvement” grants (or a similarly fair distribution methodd) to nursing homes on a scale that would effect change are needed to achieve the required investments, including electronic medical records and person-centered care transformations. It is important to emphasize that only an appropriately-sized investment will move the entire industry to a fundamental quality level, which is really the basis for the public good. These specific investments are the missing pieces to the State’s quality infrastructure, and once they can be put in place, working together with the existing regulations and surveillance, New York will have a solid long-term care quality foundation.

Building such a quality infrastructure is, of course, not the sole responsibility of New York State government. Like other efforts to achieve a public good, the benefits of an in-control nursing home system accrue to many segments of society, as well as Medicare and commercial payers. Therefore, options to obtain investments from all payers toward building a high-quality, efficient system must be defined. Advancing Excellence in America’s Nursing Homes and other key coalitions may be helpful in this regard.

Conclusion
Quality nursing home care is attainable. It is best achieved with a total quality management approach: the right inputs, the right infrastructure, empowered staff and efficient processes. Investments in building quality into New York’s facilities to-date have already paid off in significant outcome gains.

Reducing the remaining variability requires continued infrastructure investments, not narrow resource re-allocations that could occur under value-based purchasing. In particular, the next leaps forward will require health information technology and direct care decision-making. With all beneficiaries contributing to the investment, a solid quality foundation can be built, and perhaps then, and only then, could specific gains be made through VBP.