DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland 21244-1850 
 
Center for Medicaid and State Operations 
SMDL #08-009 
November 14, 2008 
Dear State Medicaid Director: 
We are writing to inform you about the Medicare Nursing Home Value-Based Purchasing 
(NHVBP) Demonstration.  The demonstration is a pay-for-performance initiative designed to 
assess the quality of care in nursing homes, based on selected measures of quality, and then make 
additional payments to those nursing homes with higher quality performance.  We are asking 
States that are interested in hosting the demonstration to submit a letter inviting the Centers for 
Medicare & Medicaid Services (CMS) to conduct the Medicare NHVBP Demonstration in their 
State.  We request your response by January 9, 2009.  The remainder of this letter provides further 
details, as well as contact and resource information. 
As the largest combined purchaser of nursing home services (about $64 billion per year), States 
and CMS have the ability to exert substantial leverage to insist on high levels of quality.  
Purchasing power is an important tool that might be more effectively employed to promote 
quality in the future.  The NHVBP Demonstration is intended to augment and reinforce other 
quality efforts by encouraging the achievement of results through financial investments made by 
nursing homes.  These achievements in quality will be met by payment methods that can discern 
the difference between excellent, good, mediocre, and poor quality.  
We are asking States that wish to host the demonstration to invite CMS to solicit nursing homes 
within their State to participate in the demonstration.  CMS plans to select up to five host States, 
plus alternates, for the demonstration.  CMS is seeking States that welcome and endorse the 
Medicare demonstration.  We will select from among States that have good survey and 
certification processes according to their State Performance and Standard Review.  Also, we will 
only select States that we expect will have at least 100 nursing homes that wish to participate.  We 
anticipate that 50 nursing homes will be assigned to the experimental group in each State, with 
another 50 homes in the control group.  The control group is necessary to enable us to measure 
the impact of the demonstration on quality and Medicare costs and to allow us to evaluate the 
demonstration.  Page 2 State Medicaid Director 
Preliminary information about the NHVBP Demonstration can be found at: 
http://www.cms.hhs.gov/DemoProjectsEvalRpts/MD/itemdetail.asp?filterType=dual,%20keyword&filterVal
ue=nursing&filterByDID=0&sortByDID=3&sortOrder=descending&itemID=CMS1198946&intNumPerPage
=10.  A brief summary of the overall design of the demonstration is enclosed.  In addition, we 
will host a conference call in the near future so that States may ask questions.  Details about the 
conference call will be made available on the above Web site. 
States that are interested in hosting the demonstration should submit a letter of invitation to  
Mr. Ron Lambert, the CMS project officer (PO) for the demonstration, no later than January 9, 
2009.  The States that CMS selects for this project, including alternates, will be announced in late 
February.  We will then undertake a solicitation of volunteer nursing homes within the States 
selected for the Medicare demonstration asking the nursing homes to volunteer to participate.  
We welcome comments or questions about the proposed demonstration.  You may send these to:  
Nursinghomeqbp@cms.hhs.gov, or you may contact your PO at 410-786-6624 or by e-mail at 
Ronald.Lambert@cms.hhs.gov.   
Thank you for your interest in this initiative. 
Sincerely, 
/s/  /s/ 
_____________________    _____________________ 
Herb B. Kuhn  Timothy P. Love, Director 
Deputy Administrator, CMS  Office of Research, Development, 
Acting Director, Center for Medicaid and State Operations   and Information 
Enclosure  Page 3 State Medicaid Director 
cc: 
CMS Regional Administrators 
CMS Associate Regional Administrators 
Division of Medicaid and Childrens Health 
Ann C. Kohler 
NASMD Executive Director 
American Public Human Services Association 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
Matt Salo 
Director of Health Legislation 
National Governors Association 
Debra Miller 
Director for Health Policy 
Council of State Governments 
Christie Raniszewski Herrera 
Director, Health and Human Services Task Force  
American Legislative Exchange Council 
Barbara W. Levine 
Chief, Government Relations and Legal Affairs 
Association of State and Territorial Health Officials