Academic journal article Health Care Financing Review

Changes in Medicare Skilled Nursing Facility Benefit Admissions

Academic journal article Health Care Financing Review

Changes in Medicare Skilled Nursing Facility Benefit Admissions

Article excerpt

Changes in Medicare skilled nursing facility benefit admissions

In this article, the changes in Medicare skilled nursing facility (SNF) benefit admissions from 1983 through 1985 are examined and factors that influence changes in access since the implementation of Medicare's prospective payment system are analyzed. During this period, use of the SNF benefit increased nationally by 21 percent. Multivariate analysis is used to determine factors associated with changes in admissions. Changes in SNF benefit admissions were found to be negatively associated with changes in area hospital's lengths of stay and changes in hospitals' lengths of stay and changes in hospitals' discharges. Medicaid reimbursement policies were also shown to affect changes in utilization.


The Medicare skilled nursing facility (SNF) benefit was designed to provide a less costly alternative to the final days of hospital care. During the 1983-85 period, Medicare enrollees were eligible for this benefit if they had been hospitalized for at least 3 consecutive days, were admitted to an SNF within 30 days of discharge from the hospital, and required daily skilled nursing or rehabilitation services resulting from the condition for which they were hospitalized. The benefit was designed to cover 100 days of skilled nursing care; in reality, however, the average covered stay was only 29.6 days in 1983 (Health Care Financing Administration, 1985).

Prospective payment system

The time period studied is of particular interest because it encompasses years both before and after the implementation of the prospective payment system. Since the institution of PPS, hospitals have been paid a flat rate for each patient, depending on the patient's diagnosis-related group (DRG). This payment scheme creates an incentive to reduce length of stay by discharging patients as soon as it is medically justifiable. Not surprisingly, hospitals have responded to this incentive. Although hospital lengths of stay for Medicare admissions were declining prior to PPS (Table 1), the rate of decline has been much greater since its implementation. From fiscal year 1983 through 1985, Medicare lengths of stay declined by 16 percent, from 10 days to 8.4 days.

Under PPS, hospitals have a clear incentive to discharge patients to either nursing homes, home health agencies, or home more quickly than under cost-based reimbursement. Medicare patients may move from the hospital to nursing home as either Medicare, private, or Medicaid nursing home patients. However, hospitals' relative abilities to discharge patients to SNFs varies by geographic area simply because nursing home markets vary greatly (Kenney and Holahan, 1988).

Nursing home market

Prior to the implementation of PPS, Medicare patients experienced difficulty gaining access to skilled nursing care for a variety of reasons. Medicaid is the largest single payer of nursing home costs, representing 41.8 percent of total nursing home expenditures in 1985, compared with 1.7 percent for Medicare (Waldo, Levit, and Lazenby, 1986). Consequently, Medicaid policies are important factors influencing the nursing home industry in a particular State. Given the considerable variation in State Medicaid policies, statewide nursing home markets throughout the country are quite diverse with respect to bed supply, staffing levels, and the configuration of the market.

This diversity results in differential access to care for oth Medicare and Medicaid patients. Although the national average of beds per 1,000 persons age 65 or over was 49.19 in 1985, nursing home bed supply ranged from a high of 90.94 in Minnesota to a low of 22.51 in Florida (Table 2). The overall supply of beds is an important determinant of access to care for Medicare patients. If bed supply is limited, nursing homes will first satisfy priate patient demand, and many public patients will have difficulty gaining access. …

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