Value-Based Payment in Nursing Facilities: Options and Lessons for States and Managed Care Plans

To improve the value of care provided in nursing facilities, payers are experimenting with value-based payment (VBP) approaches that link financial rewards to measures of quality. Drawing on findings from interviews with state officials and plan representatives, this brief describes the VBP approaches that select states and managed care plans currently use, presents perceived effects of VBP, and shares lessons on the design and administration of VBP programs. States interested in VBP may look to the examples in the brief to design their own VBP programs or encourage plans to do so. States and plans that blend Medicare and Medicaid funding may find VBP especially attractive for improving nursing facility care for dually eligible beneficiaries who may move between skilled/rehabilitation and custodial stays. Though this brief found few examples of VBP approaches that fully integrate incentives across payers, states or plans that wish to develop such initiatives can draw from the lessons in this brief by measuring facilities on services and outcomes that require coordinated medical and custodial care, or by using alternative payment strategies that allow providers to share in additional risk and rewards.