RUGs II: implications for management and quality in long term care

Case-mix-based reimbursement could provide long term care facilities with a financial incentive to accept the more acutely ill patients who are being discharged from hospitals under Medicare's prospective payment system. But a financial incentive to maintain a complex case mix could also encourse nursing homes to provide substandard care. New York's Medicaid program has coupled a reimbursement method based on Resourse Utilizationm Groups (RUGs II) with regulatory efforts to ensure quality in a model that may be be adopted by Medicare and by Medicaid programs in other states. This article describes New York's system and discusses a number of management and quality assurance strategies that may be useful to nursing homes under RUGs II.