Incentive payments to nursing homes based on quality-of-care outcomes

The federal Omnibus Budget Reconciliation Act of 1987 specifies that a state may establish a program to reward--through public recognition, incentive payments, or both--nursing facilities that provide the highest quality care to residents entitled to Medicaid. As state policymakers, providers, and advocates consider development of systems for rewarding quality in nursing homes, including incentive payments based on resident outcomes, theoretical and practical dilemmas must be addressed. The article examines the impetus for combining incentives with outcome measures and the conceptual dilemmas that outcome-based payments pose. Issues basic to successful implementation of incentive payments to nursing homes based on quality of care outcomes are also delineated.