The following is analysis and commentary by Jay Gormley, chief investment officer and COO, Advisory, Zimmet Health Services Group (ZHSG). 

This is about two weeks old, but Park Place Live hosted a conversation between Marc Zimmet and Mark Parkinson (called a Thrilla in Manila-pan) about the role of quality-based payments in Medicaid reimbursements in SNFs.

It’s worth watching the debate in full. Always fun when mom and dad fight in front of the kids.

Based on this debate, and on conversations I have had with both of them, the fundamental difference is not so much a true disagreement as it is a difference in emphasis. At its core, the discussion centers on whether quality-based payment incentives in Medicaid are an effective and appropriate tool for improving nursing home performance. While both agree that quality and staffing are critical issues in the sector, they diverge in meaningful ways on how financial incentives should be structured and distributed.

Parkinson’s Take

Mark (with a K) Parkinson argues strongly in favor of quality-based payments as a necessary mechanism to drive improvement across the industry. His position is grounded in the belief that poor-performing providers represent a systemic risk, both to residents and to the broader reputation and regulatory stability of the sector. He emphasizes that incentives matter, noting that “people respond to the incentives that we give them,” and that tying reimbursement to measurable quality outcomes encourages facilities to focus on improving care. Parkinson points to examples such as Ohio, where facilities must meet certain quality thresholds to receive meaningful payment increases, suggesting that providers are “scrambling like crazy to improve their QMs,” which he interprets as evidence that the model is working as intended. From his perspective, even if the current systems are not perfect, they create a necessary framework where better performance is recognized and rewarded, ultimately pushing the system toward higher overall quality.

Zimmet’s Take

Marc (with a C) Zimmet, by contrast, does not dispute the importance of quality but raises fundamental concerns about the way these incentive programs are currently designed. His central argument is that quality-based payments are inherently regressive in practice. He explains that facilities with a higher share of Medicare FFS patients tend to have stronger financial footing (because as you all know Medicare FFS is the industry’s highest payer), allowing them to maintain higher staffing levels, achieve better outcomes, and continue to attract Medicare admission. He also notes that once upon a time SNFs maintained Medicare-certified units while the rest of the house were NFs (Medicaid certification only). The Medicare unit was often staffed disproportionately more than the Medicaid beds. With virtually all beds now dually certified, operations still cluster that way, but the staffing data cuts across all units.

In other words, those hours are focused on Medicare, short-stay admissions as opposed to evenly distributed across the facility. As a result, these facilities are more likely to qualify for and receive quality incentive payments. Medicaid subsidizes Medicare and then rewards the same providers with more Medicaid dollars for spending on Medicare.   

Meanwhile, facilities that are predominantly Medicaid struggle with lower reimbursement and tighter margins, lack the resources needed to add staff, which helps drive quality metrics in the first place. In his words, “the facilities that need the money least are the ones that earn it [but not by spending on Medicaid residents],” which he characterizes as a form of misallocation and payment distortion. Zimmet also expresses skepticism about the integrity of the quality measures themselves, describing them as “the least objective” or “most manageable” metrics, implying that the scores may be as much about managing the process than by staffing.

And subsequent to the “Thrilla” he posted some supporting data to LinkedIn that are related to New Jersey’s quality program.

That data shows a clear relationship between Medicaid rate levels, payer mix, staffing, and quality outcomes across 287 freestanding nursing facilities. When facilities are grouped by Medicaid rate quintile, a pattern emerges in which lower-rate facilities tend to have higher Medicaid concentration and weaker operating metrics, while higher-rate facilities show lower Medicaid share and stronger performance. For example, the lowest-rate groups, with base rates in the $237 to $245 range, have Medicaid shares approaching 65 percent to 69 percent, along with lower staffing levels and quality scores, with star ratings below 3.0 and hours per resident day in the mid-3.5 range. By contrast, higher-rate groups, with rates ranging from roughly $268 to $285, have Medicaid shares closer to 50 % and exhibit stronger staffing and quality performance, with star ratings rising above 3.1 and staffing levels approaching or exceeding 4.0 hours per resident day. The data suggests that this increased performance is being funded by payers other than Medicaid not by increased Medicaid dollars.

Importantly, this framing clarifies that the observed differences are not random but are anchored in the underlying payor mix. Facilities with lower Medicaid rates and higher Medicaid mix have fewer resources to invest in staffing and consequently score lower on quality metrics and receive less performance-based payments. Facilities with higher rates, and typically more Medicare mix, are better resourced and therefore better positioned to achieve stronger outcomes.

Viewed in this context, the distribution of quality incentive payments in New Jersey appears to track these underlying advantages rather than offset them. Facilities that already benefit from higher rates, lower Medicaid burden, and stronger staffing, and need supplemental funding the most…get it the least.

Targeted Approach

Rather than rewarding already high-performing providers, Zimmet advocates for a more targeted approach that directs resources to facilities with the greatest need. He suggests that if additional funding is available, it should be structured as a conditional support mechanism for under-resourced providers, particularly those with high Medicaid populations. For example, he proposes a model where facilities receive additional payments specifically to increase staffing, with clear accountability such that “if it’s used for staff, it becomes part of the rate; if not the dollars are clawed back.”

This approach, in his view, would more directly address the root cause of quality deficiencies, which he identifies as insufficient staffing driven by inadequate reimbursement, rather than a lack of incentives. (One further note about New Jersey ...the Garden State is the only one that lacks a rate-setting system. Current rates are based on activity from the first Obama Administration; irrespective of patient profile).

At its core, the "disagreement" reflects two different philosophies of policy design. Parkinson emphasizes the power of incentives to shape behavior and drive system-wide improvement, even if the distributional effects are uneven. Zimmet focuses on "SNFonomic" principles of provider position within a market, arguing that without correcting underlying financial disparities, incentive-based models risk reinforcing existing gaps between well-resourced and under-resourced providers. While both perspectives acknowledge the importance of improving quality in nursing homes, they offer fundamentally different paths for achieving that goal.

Choosing a Viewpoint

So where do I fall on this one?

I think Marc has the stronger argument here. States should pay for the behavior they want to encourage but not reward behavior that already exists due to an inequitable system. The system itself is so out of "whack" (technical term) that any mechanism that relies on an existing assumption of payment equity is doomed to fail, or at least be muted in its ability to help facilities that really need it (e.g., high Medicaid buildings that lack the resources of buildings with more Medicare FFS).

That is why I and others in the firm are big fans of targeted add-ons that pay for specific actions without Medicare funding distortions, and also why I think Marc’s idea of front-loading funding and then clawing it back if outcomes are not achieved, for example around staffing, is a compelling approach.

Regardless, it is still valuable (and kind of cool) to see these two really dig into an issue of rate construction that has real implications for aligning equity with legislative intent. I strongly encourage you to check it out.

Comments or questions? Contact Patrick Connole at pconnole@parkplacelive.com.