Impact of Medicaid Reimbursement on Mental Health Quality Indicators

The Minimum Data Set (MDS) is an important measurement tool used by the Centers for Medicare and Medicaid Services (CMS) and state health regulators. MDS data are collected on all nursing facility residents in Medicare and Medicaid certified facilities and are used for two main purposes: (1) to determine the appropriate daily case-mix nursing facility reimbursement rate for Medicare and several state Medicaid programs via the Resource Utilization Group (RUG-III) system, and (2) to create the MDS Quality Indicators (QIs). The QIs were developed at the University of Wisconsin-Madison's Center for Health Systems Research and Analysis (CHSRA) and created with the intent to assess quality and foster quality improvement in nursing facilities (Zimmerman et al. 1995). The QIs are based on specific person-level MDS data aggregated to reflect the percentage of nursing facility residents with specific undesirable health conditions (e.g., depression symptoms) or potentially poor service indicators (e.g., the use of restraints). Because higher QI values represent poorer quality, the MDS QIs are referred to as “poor quality indicators” or “poor QI values” from this point forward. A wide variety of information on nursing facility residents is captured by the MDS, including aspects of the residents' mental health and well-being such as cognitive status and the presence of depressive symptoms and behavioral symptoms affecting others. These measures are used in the RUG-III case-mix reimbursement system, where residents who are identified as having depression symptoms, behavioral symptoms affecting others, and cognitive impairment may have higher daily reimbursement rates assigned to them compared with similar residents who are not identified as having these symptoms. These same MDS data are also used in generating four of the poor quality indicators: (1) prevalence of behavioral symptoms affecting others, (2) prevalence of symptoms of depression, (3) prevalence of symptoms of depression with no antidepressant therapy, and (4) incidence of cognitive impairment. Supplementary material Appendix A1 describes how these measures are calculated and the MDS components used to generate these measures. CMS has provided data on the QIs to the general public where state-level measures of the QIs are available on the CMS website and similar facility measures, based on the same MDS data as the QIs, are available on the Medicare Nursing Home Compare website. Additionally, The CMS website currently states that the agency is considering using the QIs or the related quality measures in a “pay-for-performance” demonstration initiative in nursing facilities (CMS 2006). Pay-for-performance initiatives aim to improve the quality of care through financial incentives, based on quantifiable measures (Rowe 2006), however, some have challenged whether pay-for-performance strategies with fixed performance targets can effectively improve quality (Rosenthal et al. 2005). While some researchers have found that most of the nursing facility QIs have sufficient validity and reliability to be used in research (Karon, Sainfort, and Zimmerman 1999; Morris et al. 2003), other researchers have challenged the validity and reliability of the QIs and have suggested that while the QIs have been used for regulatory purposes, they are still very much a work in progress (Arling et al. 2005; Mor 2005; Sangl et al. 2005). A further challenge to these measures is that they could be artificially inflated in states with MDS-based case-mix reimbursement systems in response to financial incentives to document nursing home residents with higher acuity, where symptoms of behaviors affecting others, depression symptoms, and poor cognitive functioning are factors in determining resident acuity. Researchers have found that one of the major responses to states adopting a case-mix reimbursement system is that access to nursing facilities increased for higher acuity residents (Arling and Daneman 2002; Grabowski 2002). Some researchers have suggested, however, that the increases in patient acuity after case-mix implementation may have been due to documentation changes rather than actual changes in case mix (Arling and Daneman 2002; Weissert and Muslinger 1992). The documentation changes can be the result of poor past documentation being corrected or a more aggressive profit-oriented documentation strategy of “gaming” (Lu 1999; Courty and Marschke 2003). Health economists examined gaming when Medicare changed to a prospective payment system for hospital services. Researchers found that at least part of the increase in case mix among hospitals after the Diagnosis Related Groups (DRG) system was introduced was attributed to differences in documentation or “DRG creep” (Steinwald and Dummit 1989; Carter, Newhouse, and Relles 1990; Hsia et al. 1992; Silverman and Skinner 2004). The experience of “DRG creep” is particularly relevant to the use of the MDS for nursing facility policy because MDS data are the basis for case-mix reimbursement in the RUG-III systems and they are also the source for the poor QIs. One report by the Office of Inspector General (2001) found that both “upcoding” and “downcoding” were occurring in the MDS assessments of Medicare nursing facility residents and suggested that these findings reflect confusion over the assessment process, rather than systematic bias. Aside from this report, however, there is a lack of published research on upcoding or downcoding of the MDS. One area that allows an investigation of documentation incentives in nursing facilities is the differences in state Medicaid programs and their use of the MDS for reimbursement. Because Medicaid is the largest payer of nursing facility care (U.S. GAO 2002a), nursing facilities located in states with a MDS-based Medicaid reimbursement system, referred to in this article as “MDSM states,” have a greater incentive to document these symptoms because documentation can result in higher payment amounts. Therefore, this paper examines whether facilities located in states that use the MDS for state Medicaid reimbursement have higher poor QI values compared with facilities in other states.