This study uses a computer simulation model to determine whether case-mix reimbursement (CMR) for nursing homes can reduce the excess waiting time faced by heavy-care public-pay patients who seek nursing home care.

Under fixed-rate reimbursement nursing homes are biased against admitting public-pay heavy-care patients. CMR differs from fixed-rate schemes by matching nursing home payments to the level of care patients need.

A system dynamics model was developed to investigate how the characteristics of CMR policies and the conditions under which they operate determine CMR's effectiveness.

The model simulated patient flow through the general community, hospitals, nursing homes, home care, hospital long-term care queues and community long-term queues.

Analysis of model behavior was followed by a series of experiments in which price and time characteristics of CMR and long-term care sector growth were systematically varied.

The following conclusions are drawn: (1) Patient cross-flows cause the system to appear unresponsive to reimbursement changes, even when nursing homes admission behavior has, in fact, changed. Because of the cross-flows, changes in nursing home admission behavior may not change patients' waiting time. (2) Patient waiting time is the key measure of the effectiveness of CMR. Patient composition, queue sizes and admission rates are likely to be misleading. (3) Case-mix reimbursement can reduce high-need public-pay patients' waiting times. (4) The reduction is affected by the characteristics of the CMR policy and by the scenario in which it operates. (5) Most CMR policies increase public nursing home costs, but some reduction in waiting time gap can be managed without additional expenditure. (6) The general price level and the price boost for high-need patients determine the expenditure level, but the frequency of patient assessment and the time lag in implementing a new reimbursement rate determine the efficiency of the policy. (7) CMR is more effective when LTC resources are scarce, but its effect is overshadowed by the increased waiting times caused by the shortage. (8) The efficiency of CMR is affected by the quantity of LTC resources available.