Case mix adjusted nursing-home reimbursement: a critical review of the evidence

Nursing-home case mix adjusted payment systems typically base payments on estimates of patients' care needs, but to date the data on their effectiveness are ambiguous. Studies mainly show that access for patients most in need of care appears to improve under these systems. Case mix based payment systems have both positive and negative effects on quality of care and require compensating mechanisms for the potentially harmful incentives they can generate. On the positive side, nursing homes are paid more equitably; the negative aspect is reflected in higher costs, particularly for administration. A Health Care Financing Administration (HCFA) demonstration project may provide insights, but its limited number of predominantly small, rural, participating states, its tandem quality assurance system, and potentially confounding market variables may restrict the value of this project. We do not yet have the data to assess the impact of instituting case mix adjustment systems.