Paying for performance in nursing homes: don't throw the baby out with the bathwater.

In previous centuries, before the advent of indoor plumbing, families bathed in the same tub of water. The order of bathing was determined according to age and stature within the family. The heads of the household bathed first, followed by the next generation, and so on. By the time the babies were bathed, the water was less than clear. Thus arose the saying ‘‘Don’t throw the baby out with the bathwater.’’ In this issue of the Journal of the American Geriatrics Society, Briesacher et al. have provided us with a thoughtful and thought-provoking analysis of pay-for-performance (P4P) in nursing homes. They raise numerous legitimate caveats about P4P in general and about the Centers for Medicare and Medicaid Services (CMS) plans for a P4P demonstration in nursing homes in particular. They urge the nursing home industry to think carefully before participating in the CMS nursing home ‘‘Value-Based Purchasing’’ (i.e., P4P) demonstration. Indeed, there are myriad complex issues surrounding P4P in nursing homesFwhat one might refer to as ‘‘dirty bathwater.’’ But there is a baby in there, and we should not be so quick to throw it out with the dirty bathwater. Like a baby, P4P is immature now, but realigning some incentives in Medicare funding based on better outcomes could evolve into a powerful tool in our efforts to improve the quality of care we provide in nursing homes, as well as for the geriatric population in other settings. Some have advocated this strategy for many years. P4P attempts to address some of the fundamental problems with the Medicare fee-for-service system. If you have read Stephen Levitt and Stephen Dubner’s entertaining book Freakonomics, you understand clearly that financial incentives drive much of human behavior in our modern society. As well intended as Medicare was when it was implemented in the 1960s, and despite its ongoing success in protecting older Americans from the potentially catastrophic costs of medical care, its fee-for-service system provides some perverse financial incentives that can drive healthcare professionals and institutions to do the wrong thing for older people. More care, and the use of expensive diagnostic and therapeutic procedures without careful thought to their risks and benefits as well as patient and family preferences, can result in potentially avoidable, costly complications that may in turn cause substantial morbidity and suffering. Many studies have, in fact, failed to show a correlation between Medicare spending and various outcomes of care, including patient satisfaction. Admittedly, modern medicine can provide miracles when the right interventions are implemented in the right patients, and the costs in terms of quality of life in these cases may be viewed as inconsequential. My favorite female patient, who is going on 104, had thrombolysis after an acute stroke that caused hemiparesis and dysarthria when she was 98; she is now as affable and pleasant as ever, and the joy of her daughter’s life. I myself felt the pain and disability of endstage degenerative joint disease in my right hip, and after a hip replacement a few years ago, I am as healthy and active as ever. I could not imagine living the rest of my life with my presurgical function and quality of life. Thus, I am not suggesting that spending precious Medicare dollars on high-tech medicine is the wrong thing to do for all older patients. I am, however, suggesting that these interventions need to be carefully targeted and that financial incentives in the current Medicare fee-for-service system drive some inappropriate and ineffective care. Reducing such avoidable expenditures would improve care and produce savings that CMS could use for P4P or value-based purchasing initiatives. One major sticking point in the proposed CMS demonstration on P4P in nursing homes is the requirement for Medicare savings to be achieved in order for facilities to receive financial incentives. As mentioned in Briesacher et al.’s article, several states have initiated P4P programs in nursing homes, but the performance measures they are using are unlikely to generate Medicare savings. One measure that might offer the opportunity to improve care quality and reduce Medicare expenditures at the same time is potentially avoidable hospitalizations of nursing home residents. Avoidable hospitalizations play a prominent role in the planned CMS P4P demonstration, accounting for 30 of 100 points that can be earned for incentive payments. For nursing homes to reduce potentially avoidable hospitalizations, they have to have the capacity to deliver appropriate and high-quality care for acute and subacute illnesses, as well as palliative care. Many if not most nursing homes currently do not have this capacity. Reducing avoidable hospitalizations from nursing homes will therefore cost before it saves. Unless adequate infrastructure is supported in these facilities, P4P initiatives that require savings without up-front investment will not be successful and may have unintended consequences. The incentives may encourage poorly prepared facilities to care for sicker patients than they can safely care DOI: 10.1111/j.1532-5415.2008.01924.x