Does how much and how you pay matter? Evidence from the inpatient rehabilitation care prospective payment system

We use the implementation of a new prospective payment system (PPS) for inpatient rehabilitation facilities (IRFs) to investigate the effect of changes in marginal and average reimbursement on costs. The results show that the IRF PPS led to a significant decline in costs and length of stay. Changes in marginal reimbursement associated with the move from a cost-based system to a PPS led to a 7-11% reduction in costs. The elasticity of costs with respect to average reimbursement ranged from 0.26 to 0.34. Finally, the IRF PPS had little or no impact on mortality or the rate of return to community residence.     

The effect of prospective payment on admission and treatment policy: Evidence from inpatient rehabilitation facilities

We examine provider responses to the Medicare inpatient rehabilitation facility (IRF) prospective payment system (PPS), which simultaneously reduced marginal reimbursement and increased average reimbursement. IRFs could respond to the PPS by changing the number of patients admitted, admitting different types of patients, or changing the intensity of care. We use Medicare claims data to separately estimate each type of provider response. We also examine changes in patient outcomes and spillover effects on other post-acute care providers. We find that costs of care initially fell following the PPS, which we attribute to changes in treatment decisions rather than the characteristics of patients admitted to IRFs within the diagnostic categories we examine. However, the probability of admission to IRFs increased after the PPS due to the expanded admission policies of providers. We find modest spillover effects in other post-acute settings and negative health impacts for only one of three diagnostic groups studied.     

Effects of Payment Changes on Trends in Post-Acute Care

Objective. To test how the implementation of new Medicare post-acute payment systems affected the use of inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), and home health agencies.
Data Sources. Medicare acute hospital, IRF, and SNF claims; provider of services file; enrollment file; and Area Resource File data.
Study Design. We used multinomial logit models to measure realized access to post-acute care and to predict how access to alternative sites of care changed in response to prospective payment systems.
Data Extraction Methods. A file was constructed linking data for elderly Medicare patients discharged from acute care facilities between 1996 and 2003 with a diagnosis of hip fracture, stroke, or lower extremity joint replacement.
Principal Findings. Although the effects of the payment systems on the use of post-acute care varied, most reduced the use of the site of care they directly affected and boosted the use of alternative sites of care. Payment system changes do not appear to have differentially affected the severely ill.
Conclusions. Payment system incentives play a significant role in determining where Medicare beneficiaries receive their post-acute care. Changing these incentives results in shifting of patients between post-acute sites.     

Variation in 30-Day Readmission Rates from Inpatient Rehabilitation Facilities to Acute Care Hospitals

ObjectivesTo quantify the rate of readmission from inpatient rehabilitation facilities (IRFs) to acute care hospitals (ACHs) during the first 30 days of rehabilitation stay. To measure variation in 30-day readmission rate across IRFs, and the extent that patient and facility characteristics contribute to this variation.DesignRetrospective analysis of an administrative database.Setting and ParticipantsAdult IRF discharges from 944 US IRFs captured in the Uniform Data System for Medical Rehabilitation database between October 1, 2015 and December 31, 2017.MethodsMultilevel logistic regression was used to calculate adjusted rates of readmission within 30 days of IRF admission and examine variation in IRF readmission rates, using patient and facility-level variables as predictors.ResultsThere were a total of 104,303 ACH readmissions out of a total of 1,102,785 IRFs discharges. The range of 30-day readmission rates to ACHs was 0.0%‒28.9% (mean = 8.7%, standard deviation = 4.4%). The adjusted readmission rate variation narrowed to 2.8%‒17.5% (mean = 8.7%, standard deviation = 1.8%). Twelve patient-level and 3 facility-level factors were significantly associated with 30-day readmission from IRF to ACH. A total of 82.4% of the variance in 30-day readmission rate was attributable to the model predictors.Conclusions and ImplicationsFifteen patient and facility factors were significantly associated with 30-day readmission from IRF to ACH and explained the majority of readmission variance. Most of these factors are nonmodifiable from the IRF perspective. These findings highlight that adjusting for these factors is important when comparing readmission rates between IRFs.     

Measuring function for Medicare inpatient rehabilitation payment

We studied 186,766 Medicare discharges to the community in 1999 from 694 inpatient rehabilitation facilities (IRF). Statistical models were used to examine the relationship of functional items and scales to accounting cost within impairment categories. For most items, more independence leads to lower costs. However, two items are not associated with cost in the expected way. The probable causes of these anomalies are discussed along with implications for payment policy. We present the rules used to construct administratively simple, homogeneous, resource use groups that provide reasonable incentives for access and quality care and that determine payments under the new IRF prospective payment system (PPS).     

Physical rehabilitation following medicare prospective payment for skilled nursing facilities

OBJECTIVE: To examine the effect of the Medicare prospective payment system (PPS) for skilled nursing facilities (SNF) on the delivery of rehabilitation therapy to residents. DATA SOURCES: Resident-level data are based on the Resident Assessment Instrument Minimum Data Set for nursing facilities. All elderly residents admitted to SNFs in Michigan and Ohio in 1998 and 1999 form the study population (n=99,952). STUDY DESIGN: A differences-in-differences identification strategy is used to compare rehabilitation therapy for SNF residents before and after a change in Medicare SNF payment. Logistic and linear regression analyses are used to examine the effect of PPS on receipt of physical, occupational, or speech therapy and total therapy time. DATA EXTRACTION: Data for the present study were extracted from the University of Michigan Assessment Archive Project (UMAAP). One assessment was obtained for each resident admitted to nursing facilities during the study period. PRINCIPAL FINDINGS: The introduction of PPS for all U.S. Medicare residents in July of 1998 was associated with specific targeting of rehabilitation treatment time to the most profitable levels of therapy. The PPS was also associated with increased likelihood of therapy but less rehabilitation therapy time for Medicare residents. CONCLUSIONS: The present results indicate that rehabilitation therapy is sensitive to the specific payment incentives associated with PPS.     

Changes in the Use of Postacute Care during the Initial Medicare Payment Reforms

Objective. To examine changes in postacute care (PAC) use during the initial Medicare payment reforms enacted by the Balanced Budget Act of 1997.
Data Sources. We used claims data from the 5 percent Medicare beneficiary sample in 1996, 1998, and 2000. Linked data from the Denominator file, Provider of Service file, and Area Resource File provided additional patient, hospital, and market-area characteristics.
Study Design. Six disease groups with high PAC use were selected for analysis. We used multinomial logit regression to examine how PAC use differed by year of service, controlling for patient, hospital, and market-area characteristics.
Principal Findings. There were major changes in PAC use, and a portion of services shifted to settings where reimbursement remained cost-based. During the first reform, the home health agency interim payment system, home health use decreased consistently across disease groups. This decrease was accompanied by increased use in skilled nursing facilities (SNFs). Following the implementation of the prospective payment system for SNFs, the use of inpatient rehabilitation facilities increased.
Conclusions. The shift in usage among settings occurred in two stages that corresponded to the timing of payment reforms for home health agencies and SNFs. Evidence strongly suggests the substitutability between PAC settings. Financial incentives, in addition to clinical needs and individual preferences, play a major role in PAC use.     

The improving efficiency frontier of inpatient rehabilitation hospitals

This study uses a linear programming technique called data envelopment analysis to identify changes in the efficiency frontier of inpatient rehabilitation hospitals after implementation of the prospective payment system. The study provides a time series analysis of the efficiency frontier for inpatient rehabilitation hospitals in 2003 immediately after implementation of PPS and then again in 2006. Results indicate that the efficiency frontier of inpatient rehabilitation hospitals increased from 84% in 2003 to 85% in 2006. Similarly, an analysis of slack or inefficiency shows improvements in output efficiency over the study period. This clearly documents that efficiency in the inpatient rehabilitation hospital industry after implementation of PPS is improving. Hospital executives, health care policymakers, taxpayers, and other stakeholders benefit from studies that improve health care efficiency.     

The Role of Critical Access Hospital Status in Mitigating the Effects of New Prospective Payment Systems Under Medicare

This article examines rural hospitals that potentially qualify as critical access hospitals (CAH) and identifies facilities at substantial financial risk as a result of Medicare's expansion of prospective payment systems (PPS) to nonacute settings. Using Health Care Financing Administration (HCFA) cost reports from the federal year ending Sept. 30, 1996, combined with county-level sociodemographic data from the Area Resource File (ARF), characteristics of potential CAHs were identified and their finances analyzed to determine whether they could benefit from the cost-based reimbursement rules applicable to CAH status. Rural hospitals were identified as potential CAHs if they met a combination of federal and state criteria for necessary providers. Rural facilities were classified as "at risk" if they had poor financial ratios in conjunction with high levels of dependence on outpatient, home-care or skilled nursing services. Almost 30 percent of all rural hospitals were identified as potential CAHs. Ninety percent of potential CAH facilities were identified as "at risk" by at least one of five possible risk criteria, and one-third were identified by at least three. Of those classified "at risk," 48 percent might not benefit from conversion to CAH because their inpatient Medicare reimbursement would likely be less under CAH payment rules than under their current PPS payment rules. Many potential CAHs were doing well under inpatient PPS because they were sole community hospitals (SCH) and were therefore eligible for special adjustments to the PPS rates. The Rural Hospital Flexibility Act would be more beneficial to the population of isolated rural hospitals if those eligible for both CAH and SCH status were given the option of retaining their SCH inpatient payment arrangements while still qualifying for outpatient cost-based reimbursement.     

Organizational and market factors associated with Medicare dependence in inpatient rehabilitation hospitals.

Rehabilitation hospitals in the USA have been excluded from the Medicare Prospective Payment System (PPS) system since 1982, and have received cost-based reimbursement. However, the 1997 Balanced Budget Act mandated a PPS for inpatient rehabilitation, to be implemented by the end of 2002. This study assesses rehabilitation hospitals' dependency on Medicare. Findings show that not-for-profit hospitals, facilities with fewer services, facilities with lower staffing levels, and hospitals with lower operating expenses and profits, have a higher proportion of their inpatient revenue coming from Medicare. These facilities may be vulnerable to the new PPS payment system.