Title: Applying RUG-III for reimbursement of nursing facility care

Authors: Magnus A. Bjorkgren, Brant E. Fries

Addresses: Chydenius Institute, Jyvaskyla University, Pitkansillankatu 1-3, FIN-67100 Kokkola, Finland. ' Institute of Gerontology, University of Michigan and the Ann Arbor VA Healthcare System, Ann Arbor, MI, USA

Abstract: The Resource Utilization Groups (RUG-III) case-mix classification is becoming an internationally accepted methodology for determining payment for nursing facility and care. In this paper, we discuss the key concepts of case-mix reimbursement and several different payment approaches based on RUG-III. In discussing the empirical evidence of case-mix reimbursement, we draw especially on the US experience. Clearly, the success of case-mix reimbursement depends not only on the payment design, but also on the ability to foresee market conditions and the regulatory environment in which the payment system is being implemented. Moreover, we demonstrate the need to develop a case-mix based reimbursement in Finland, where institutional long-term care is mainly provided by the public sector. Finally, we propose that developing financial reward systems based on quality and performance could be important additions to existing case-mix payment systems, as market mechanisms and government regulation of quality may not offer sufficient incentives to provide optimal care.

Keywords: RUG-III; case-mix reimbursement; nursing homes; quality of care; healthcare efficiency; nursing costs; nursing care; nursing facilities; Finland; financial reward systems; long-term care; payment rate setting; payment incentives; public healthcare.

DOI: 10.1504/IJHTM.2006.007873

International Journal of Healthcare Technology and Management, 2006 Vol.7 No.1/2, pp.82 - 99

Published online: 29 Sep 2005 *

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