Introduction
Within the nursing home landscape, a primary role of state agencies is to oversee Medicaid payments and regulate nursing homes. State officials are therefore concerned about the quality-of-care residents receive.The COVID-19 pandemic cast a stark light on the gaps of the nursing home workforce and produced heightened interest in addressing them. Research has shown that increased staffing often correlates with higher quality of care. A comprehensive 2022 report from the National Academies of Sciences, Engineering, and Medicine, “The National Imperative to Improve Nursing Home Quality,” issued a call to action that included a strong recommendation for a “well-prepared, empowered, and appropriately compensated workforce.”
As of 2022, 24 states operated Medicaid nursing home value-based payment (VBP) programs. VBP refers to a payment model that rewards providers based on their performance, rather than solely on the volume of services provided. Most of these programs incentivized performance based on clinical metrics. However, recognizing that staffing is the foundation for quality, states are increasingly choosing to employ VBP to incentivize nursing homes to recruit and retain qualified staff.
Nine states have centered their efforts on improving the quality of care in nursing homes, with four of them — Illinois, Maine, New Jersey, and Ohio — implementing Medicaid VBP to incentivize staffing in nursing homes. The VBP metrics that these states use include the Centers for Medicare and Medicaid Services’ (CMS) Five-Star Quality Rating System and the Staff Time and Resource Intensity Verification (STRIVE) ratios, staffing levels, and clinical and person-centered outcomes (see matrix).
Promising State Practices
This brief focuses on how Illinois, Maine, New Jersey, and Ohio use VBP to address the recruitment, retention, and quality of the workforce. The incorporation of staffing metrics into a state’s VBP program is an emerging workforce strategy — with Maine, New Jersey, and Ohio adopting these metrics for their state’s fiscal year 2025. This brief provides an explanation of the metrics and data sources used, remaining challenges, and lessons learned for other states to consider.
Illinois: Staffing-Level Incentive Payments and Certified Nurse Assistant Wages
Through data analysis pointing to both understaffing in Illinois’s nursing homes and the COVID-19 pandemic’s impact on its residents, the Illinois Department of Healthcare and Family Services set in motion a series of nursing home payment and financing reforms in 2022. This effort included the adoption of VBP at scale, which at projected levels of staffing would devote 15 percent of Medicaid nursing home payments to performance and specific improvements.1 For staffing metrics, two notable reforms include staffing level incentive payments and a certified nurse assistant (CNA) pay scale subsidy.
Staffing Level Incentive Payments: Illinois’s VBP strategy for staffing incentives accounted for half of the state’s 2022 reform package, with payments totaling about $350 million a year. Most notably, these payments are not capped, which further incentivizes nursing home providers to adopt a more robust staffing plan while also making Medicaid a better payer. Specifically, Illinois ties a facility’s staffing level to payment through the adoption of CMS’s STRIVE target level metric — a case-mixed, adjusted estimate of registered nurse, licensed practical nurse, and nurse aide hours needed for providing quality care — by using quarterly data from CMS’s Provider Information file and State U.S. Averages file. In Illinois, nursing homes can now earn incentive payments up to $38.68 per Medicaid resident per day depending on a facility’s STRIVE staffing ratio. These amounts are added into the nursing home’s standard per diem rate. These rate boosts range from the 70 percent federal STRIVE minimum target for nursing staffing and reach a maximum at 125 percent of the federal STRIVE target. Initial results show staffing ratios have risen for at least seven of the first eight quarters following legislative adoption, with advancements concentrated in the lowest-staffed nursing homes.
CNA Pay Scale Subsidy: To counteract inflation’s rising labor costs and attract more individuals to a CNA career, Illinois created a CNA Pay Scale Incentive Program. Nursing homes have the option to participate in this subsidy program, with Medicaid covering the subsidized portion of the increased increment. Given that Medicaid is the primary public payer of nursing home payments, Illinois leveraged this to restructure and adopt a new wage scale based on years of CNA experience. CNAs with six or more years of experience can now earn an additional increase of up to $6.50/hour. Results of this new initiative are still ongoing, but initial datashow that participation rates by nursing homes have risen to nearly 70 percent. Additionally, state officials reported that the number of hours worked by employed CNAs rose by more than 26 percent since early 2022, with a decrease in CNA contracting from staffing agencies. This is significant as more permanent staff, rather than temporary agency staff, are providing care — resulting in greater continuity of care for the residents, cost-savings, and retention of staff.
Maine’s New VBP Program: Quality Bonus Pool Includes Staff Turnover Rate
Effective January 1, 2025, Maine’s Department of Health and Human Services (DHHS) launched a new Value-Based Purchasing program for nursing homes that includes a three-year transitional bonus pool and phases in a quality withhold for sustainability. Based on community feedback, the quality metrics span across three components: staffing levels (percent of total nursing staff turnover), patient experience of care (CoreQ, a satisfaction survey), and clinical metrics (antipsychotic use, monitoring for a urinary tract infection). In particular, the staffing metrics are designed to produce staffing levels well above the minimum licensing requirements. Maine established a staffing standard of 4.44 hours per resident day (HPRD). For comparison, the national average is 3.76 HPRD. Additionally, the new rate methodology aims to decrease contracted temporary staff, with a 10-percentage level as the target percentage of contract staff.
For a gradual transition, the new rate methodology, including the VBP component, will be phased in over three years. A transition fund is being used in part to create a bonus pool totaling $8.1 million per year. In addition, beginning in year 2, the initiative will include a withhold of 1 percent from the rate, increasing to 1–2 percent in year 3. To receive funds, nursing homes must participate in select quality improvement activities in year 1, meet the minimum performance benchmark for two of the three quality metrics in year 2, and meet the minimum of all three metrics in year 3 (with the staffing metric weighted higher).
Maine’s phased-in approach and gradual withhold process provides a balance of allowing nursing homes time for implementation while incentivizing these providers to be accountable for having an adequate workforce. The phased-in withhold also creates a sustainable funding source for VBP beyond the three-year transitional period. The bonus pool is one-time transitional funding that will end unless new funds are appropriated in the future.
New Jersey and Ohio: New Staffing Metrics within Existing Quality Payment Programs
Both New Jersey and Ohio use a similar strategy of adopting staffing metrics within their existing VBP structures.
New Jersey: New Jersey’s Quality Incentive Payment Program (QIPP), jointly administered by the Division of Aging and Division of Medical Assistance and Health Services, began in fiscal year 2020. Currently, QIPP distributes $50 million as annual add-on bonus payments to nursing homes that achieve specific quality and performance metrics. These state-established benchmarks incentivize providers to improve quality of care, with original QIPP metrics encompassing usage of physical restraints, falls with major injury, antipsychotic medication use, pressure ulcers, influenza vaccinations, hospitalizations per 1,000 resident days, and the CoreQ nursing home satisfaction survey. Based on recommendations from a QIPP partner work group, New Jersey discontinued outdated or improved metrics, added a metric for weight loss, and adopted new QIPP metrics that incorporate staffing incentives for state fiscal year 2025. These staffing metrics include:
- Adjusted total nurse staffing hours. New Jersey designed new tiered payment levels that exceed existing requirements. The two tiers are based on an HPRD benchmark with Tier 1 facilities receiving an additional $6.75 per resident day if 4.1 HPRD is met or exceeded and Tier 2 facilities receiving an additional $4.50 per resident day for meeting or exceeding the state average.
- Improvement in total nurse staffing hours. Additionally, lower-staffed nursing homes that achieve a minimum benchmark of 3.6 HPRD and showcase improvement from the prior fiscal year will be eligible for a bonus add-on. This bonus add-on totals an additional $1.25 per resident day.
- Staffing retention. Along with recruitment, the QIPP model also emphasizes retention of nursing home staff. New Jersey uses turnover data from the Payroll Based Journal within the last quarter for nursing home direct-care staff to calculate a nursing home’s retention rate. New Jersey’s benchmark has been set at a 30 percent retention rate for fiscal year 2025, and the bonus add-on for this metric is $4.50 per resident day.
While results of the staffing incentives are yet to be assessed, the Department of Human Services will continue to reevaluate and update the program accordingly. The New Jersey Task Force on Long-Term Care Quality and Safety issued a final report in April 2024 that proposes additional staffing metrics for future iterations of the QIPP program.
Ohio: Ohio’s Department of Medicaid administers an incentive payment program, “Nursing Facility’s per Medicaid Day Quality Incentive Payment Rate,” for Medicaid-funded nursing homes. Original quality metricsencompassed more clinically based outcomes, including the percentage of long-stay residents at high risk for pressure ulcers; who had a urinary tract infection; whose ability to move independently worsened; and who had a catheter inserted and left in their bladder. For state fiscal year 2025, Ohio is now incorporating additional quality metrics, most notably a staffing-related metric: a calculated adjusted total of nurse staffing HPRD metric. The current state budget allocates $125 million per state fiscal year, plus a calculated sum per each nursing home, for these quality incentive payments. Going forward, the Ohio Governor’s Nursing Home Quality and Accountability Task Force — led by the Ohio Department of Aging — recommends adoption of workforce staffing levels to these existing Medicaid quality metrics.
Keys to Success
For states looking to incorporate staffing metrics into their VBP model, state officials in the Nursing Home Learning Collaborative have discussed the following policy considerations:
- State leadership — governor, state legislature, and high-ranking agency officials — is crucial to advancing nursing home reform, given the opposition of the nursing home industry.
- Key elements of VBP program design include eligibility, metrics, and financing/payment.
- Timely and accurate data are the foundation of VBP.
- VBP is part of a multi-prong strategy for improving quality in nursing homes, which also includes better transparency, accountability, and person-centered care.
- VBP requires an up-front investment to improve quality that can lead to a more efficient use of funds
Conclusion
States’ use of data and incentive payments to improve staffing is an emerging strategy. Illinois and Maine’s adoption of VBP and New Jersey and Ohio’s recent incorporation of staffing metrics within their existing quality payment programs showcase a growing trend of state focus on staffing within nursing homes and the payment incentives that bolster it. By incorporating staffing metrics within a VBP program, state officials need to consider a variety of complex decisions, including the rate-setting process, populations encompassed, the entity that makes the payments, type of providers paid, the amount paid, incentive metrics and how they are determined, payment timing, and how outcomes can be measured. Data-informed outcomes and securing buy-in from state leadership are key “building blocks” to the incorporation of staffing metrics within VBP that ensures the quality of care that nursing home residents deserve.
1 At current levels of staffing, incentives total 14.4 percent.
Nursing Home Value-Based Payment Matrix
Acknowledgments
NASHP would like to express our gratitude to West Health for its support and partnership of NASHP’s Nursing Home Learning Collaborative. The authors would also like to thank NASHP’s Hemi Tewarson and state officials from Illinois, Maine, New Jersey, and Ohio for their review of this paper.
