A three-year federal program designed to pay nursing homes based on their performance neither cut costs nor improved quality of care for residents, an independent review has found.

The Centers for Medicare & Medicaid Services (CMS) hoped it could improve the standard of care without raising Medicare costs by offering cash bonuses to nursing homes. After three years and three states, the verdict is in.

“In combining the quantitative and qualitative results, we conclude that the … demonstration did not directly lower Medicare spending and improve quality for nursing home residents,” auditors at L&M Policy Research and Harvard University say.

CMS asked the researchers to examine the results of the pay-for-performance tests. Although dated Aug. 26, the report wasn’t made public until Friday.

“Based on these analyses,” the auditors say, “it appears that quality was unchanged due to the … demonstration. We heard very little to suggest that nursing homes responded to the … demonstration incentives through direct interventions.”

Under the program, which officials dubbed the Nursing Home Value Based Purchasing Demonstration (NHVBP), nursing homes in New York, Arizona, and Wisconsin were offered cash if they improved nurse staffing, quality outcomes, survey deficiencies, and avoidable hospitalizations. The bonuses were supposed to come from a pool of cash that theoretically resulted from quality improvements, which in turn meant Medicare saved money.

Of the nine total “state-years” involved in the tests, only three saw Medicare savings, L&M and Harvard auditors found.

“The Year 1 savings in Arizona were relatively modest (total payout pool was roughly $27,000), while the savings in Wisconsin were more sizable (the total payout pool was roughly $3.5 million in Year 1 and $3 million in Year 2),” the review says.

The Wisconsin savings might also not mean the programs were working: CMS used only a single “base year” to measure costs, and Wisconsin might merely have been “regressing to the mean,” the auditors said.

L&M and Harvard say several factors may be behind the tests’ ho-hum returns: a Byzantine payment system that left administrators and staff easily confused, rewards that may have been too small, a design flaw that meant that even a home that was cutting costs and improving quality might still not get a bonus because other nursing homes in the states couldn’t deliver, and red tape that meant that federal reports and bonuses took up to 18 months to reach home administrators.

“The lack of regular and timely data made it difficult for homes to determine how well they were performing in the demonstration,” the auditors say. “One stakeholder summed up the feelings of many involved in the demonstration, saying, ‘This was an absolute missed opportunity.’”

Plus, many of the homes were already committed to quality goals, the auditors say.

“Most nursing homes did not change their actions because of the demonstration; rather, some hoped to be rewarded for things that they were already doing or thought their involvement in the demonstration would just be an opportunity to learn from other nursing homes, or prepare for what is to come from CMS moving forward,” the report says.