Rehabilitation therapy in skilled nursing facilities: effects of Medicare's new prospective payment system

In 1998 the Centers for Medicare and Medicaid Services (CMS) began phasing in a new prospective payment system (PPS) for Medicare payments to skilled nursing facilities (SNFs). I examine the effects of the new PPS on the level of rehabilitation therapy provided in SNFs. The percentage of residents of freestanding SNFs receiving extremely high levels of rehabilitation therapy dropped significantly, and the percentage receiving moderate levels increased. Freestanding SNFs, particularly for-profits, dramatically altered the services they provided in response to new financial incentives. This responsiveness underscores the importance of efforts now under way to refine the SNF PPS.     

Rehabilitation costs: implications for prospective payment.

OBJECTIVE: To obtain information relevant to development of prospective payment for Medicare rehabilitation facilities (RFs) and skilled nursing facilities (SNFs): compares service utilization, length of stay (LOS), case mix, and resource consumption for Medicare patients receiving postacute institutional rehabilitation care. DATA SOURCES/STUDY SETTING: Longitudinal patient-level and related facility-level data on Medicare hip fracture (n = 513) and stroke (n = 483) patients admitted in 1991-1994 to a sample of 27 RFs and 65 SNFs in urban areas in 17 states. STUDY DESIGN: For each condition, two-group RF-SNF comparisons were made. Regression analysis was used to adjust RF-SNF differences in resource consumption per stay for patient condition (case mix) and other factors, since random assignment was not possible. DATA COLLECTION/EXTRACTION METHODS: Providers at each facility were trained to collect patient case-mix and service utilization information. Secondary data also were obtained. PRINCIPAL FINDINGS: RF patients had shorter LOS, fewer total nursing hours (but more skilled nursing hours), and more ancillary hours than SNF patients. After adjustment, ancillary resource consumption per stay remained substantially higher for RF than SNF patients, particularly for stroke. The adjusted nursing resource consumption differences were smaller than the ancillary differences and not statistically significant for hip fracture. Supplemental outcome findings suggested minimal differences for hip fracture patients but better outcomes for RF than SNF stroke patients. CONCLUSIONS: Much can be gained from an integrated approach to developing prospective payment for RFs and SNFs. In that context, consideration of condition-specific per-stay payment methods applicable to both settings appears warranted.     

Effects of Medicare payment changes on nursing home staffing and deficiencies

OBJECTIVE: To investigate the effects of Medicare's Prospective Payment System (PPS) for skilled nursing facilities (SNFs) and associated rate changes on quality of care as represented by staffing ratios and regulatory deficiencies. DATA SOURCES: Online Survey, Certification and Reporting (OSCAR) data from 1996-2000 were linked with Area Resource File (ARF) and Medicare Cost Report data to form a panel dataset. STUDY DESIGN: A difference-in-differences model was used to assess effects of the PPS and the BBRA (Balanced Budget Refinement Act) on staffing and deficiencies, a design that allows the separation of the effects of the policies from general trends. Ordinary least squares and negative binomial models were used. DATA COLLECTION METHODS: The OSCAR and Medicare Cost Report data are self-reported by nursing facilities; ARF data are publicly available. Data were linked by provider ID and county. PRINCIPAL FINDINGS: We find that professional staffing decreased and regulatory deficiencies increased with PPS, and that both effects were mitigated with the BBRA rate increases. The effects appear to increase with the percent of Medicare residents in the facility except, in some cases, at the highest percentage of Medicare. The findings on staffing are statistically significant. The effects on deficiencies, though exhibiting consistent signs and magnitudes with the staffing results, are largely insignificant. CONCLUSIONS: Medicare's PPS system and associated rate cuts for SNFs have had a negative effect on staffing and regulatory compliance. Further research is necessary to determine whether these changes are associated with worse outcomes. Findings from this investigation could help guide policy modifications that support the provision of quality nursing home care.     

Prospective payment for Medicare skilled nursing facilities: background and issues.

Strong interest by Congress in a Medicare prospective payment system for skilled nursing facilities (SNF's) resulted in a major study by the Health Care Financing Administration on the Medicare SNF benefit. This article highlights findings from that study, which addressed the following: the Medicare SNF benefit, utilization and expenditures, the Medicare SNF industry, problems with the current Medicare SNF reimbursement system, efforts to develop a Medicare SNF case-mix measure, and case-mix differences between hospital-based and freestanding SNF's. In addition, we discuss the implications of the study findings for the design of a Medicare SNF prospective payment system (PPS).     

Medicare prospective payment and the volume and intensity of skilled nursing facility services

In 1998, Medicare adopted a per diem Prospective Payment System (PPS) for skilled nursing facility care, which was intended to deter the use of high-cost rehabilitative services. The average per diem decreased under the PPS, but because per diems increased for greater therapy minutes, the ability of the PPS to deter the use of high-intensity services was questionable. In this study, we assess how the PPS affected the volume and intensity of Medicare services. By volume we mean the product of the number of Medicare residents in a facility and the average length-of-stay, by intensity we mean the time per week devoted to rehabilitation therapy. Our results indicate that the number of Medicare residents decreased under PPS, but rehabilitative services and therapy minutes increased while length-of-stay remained relatively constant. Not surprisingly, when subsequent Medicare policy changes increased payment rates, Medicare volume far surpassed the levels seen in the pre-PPS period.     

Do financial incentives matter? Effects of Medicare price shocks on skilled nursing facility care

Skilled nursing facility (SNF) spending has been one of the fastest growing categories of Medicare spending over the past few decades, and reductions in SNF payments are often recommended as part of Medicare cost containment efforts. Using a quasi‐experiment resulting from a policy‐driven and facility‐specific Medicare payment change, we provide new evidence on how Medicare payment changes affect the amount of SNF care provided to Medicare patients. Specifically, we examine a one‐time, plausibly exogenous change in the hospital wage index, an area‐level adjustment to SNF payments that affected the majority of SNFs nationwide. Using a panel dataset of SNFs, we model the effects of these payment changes on more than 12,000 SNFs across the United States. We find that increases in Medicare payment rates to SNFs increased the total number of Medicare resident days at SNFs. Specifically, a 5% payment increase raised Medicare resident days by 2.33% at facilities with a 10% Medicare share relative to 0%. Further, the effects were asymmetric: Although Medicare payment increases affected Medicare days, payment decreases did not. Our results have important implications for policies that alter the Medicare base payment rates to SNFs and other health care providers.     

Medicare payment changes and nursing home quality: effects on long-stay residents

The Balanced Budget Act of 1997 dramatically changed the way that Medicare pays skilled nursing facilities, providing a natural experiment in nursing home behavior. Medicare payment policy (directed at short-stay residents) may have affected outcomes for long-stay, chronic-care residents if services for these residents were subsidized through cost-shifting prior to implementation of Medicare prospective payment for nursing homes. We link changes in both the form and level of Medicare payment at the facility level with changes in resident-level quality, as represented by pressure sores and urinary tract infections in Minimum Data Set (MDS) assessments. Results show that long-stay residents experienced increased adverse outcomes with the elimination of Medicare cost reimbursement.     

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.     

The Impact of the Prospective Payment System for Skilled Nursing Facilities on Therapy Service Provision: A Transaction Cost Approach

Objective. To examine skilled nursing facilities (SNFs) "make-or-buy" decisions with respect to rehabilitation therapy service provision in the 1990s, both before and after implementation of Medicare's Prospective Payment System (PPS) for SNFs.
Data Sources. Longitudinal On-line Survey Certification and Reporting (OSCAR) data (1992–2001) on a sample of 10,241 freestanding urban SNFs.
Study Design. We estimated a longitudinal multinomial logistic regression model derived from transaction cost economic theory to predict the probability of the outcome in each of four service provision categories (all employed staff, all contract, mixed, and no services provided).
Principal Findings. Transaction frequency, uncertainty, and complexity result in greater control over therapy services through employment as opposed to outside contracting. For-profit status and chain affiliation were associated with greater control over therapy services. Following PPS, nursing homes acted to limit transaction costs by either exiting the rehabilitation market or exerting greater control over therapy services by managing rehabilitation services in-house.
Conclusions. The financial incentives associated with changes in reimbursement methodology have implications that extend beyond the boundaries of the health care industry segment directly affected. Unintended quality and access consequences need to be carefully monitored by the Medicare program.     

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.