Swing-bed services under the Medicare program, 1984-1987

Health Care Financing Review, Spring, 1990 by Herbert A. Silverman

Swing-bed services under the Medicare program, 1984-87

Introduction

This article traces the growth in the use of swing-bed services by Medicare beneficiaries from 1984 through 1987. In the context of the Medicare program, swing beds are beds that can be used by small rural hospitals to furnish both acute and post-acute care. To be covered under Medicare, the post-acute services must meet the same level of care requirements applied to the reimbursement of services by skilled nursing facilities (SNFs). States have the option of also covering swing-bed services at the intermediate care level under their Medicaid programs.

Thw swing-bed concept was incorporated into the Medicare program by the provisions of the Omnibus Reconciliation Act of 1980 (Public Law 96-499). The law authorized the Mediare and Medicaid programs to cover swing-bed services furnished by rural hospitals with fewer than 50 beds. the provisions of the law were based on the experiences gained in demonstration projects that began in rural hospitals in Utah during the early 1970s and later expanded to Iowa, South Dakota, and Texas. The approach proved popular and received public and private sector support. The program takes advantage of the declining acute care occupancy rates and the surplus bed capacity that became increasingly common among rural hospitals during the 1970s. It provided these hospitals a means of obtaining additional revenues without incurring significant additional costs. At the same time, it provided greater access to post-acute nursing care services in rural areas where such services tend to be thinly dispersed.

The regulations governing Medicare coverage of post-acute services furnished in swing-bed hospitals were issued by the Health Care Financing Administration in July 1982. The method of paying for skilled nursing care services furnished by a swing-bed hospital was based on the assumption that these hospitals incur a relatively low incremental cost to provide post-acute care. they use the personnel, euipment, and facilities already in place to serve acute care patients. Additional service requirements to meet the special needs of nursing care patients (e.g., patient activities, discharge planning) would not require a major expansion of staff. Accordingly, the per diem reimbursement rate for the routine care component of post-acute services covered under Medicare in a swing bed was set at a rate equal to the average paid by the Medicaid program to SNFs for skilled nursing care during the prior calendar year in the State where the hospital is located. Ancillary services were to be reimbursed at cost.

The period following the issuance of the swing-bed regulations was marked by intense Federal efforts to contain the rise of hospital costs to the Medicare program. Several measures affecting payments to hospitals were passed during this period. The Tax Equity and Fiscal Responsibility Act (TEFRA) was passed in September 1982; the Social Security Amendments of 1983 instituted the prospective payment system (PPS) for hospital reimbursement; and the Deficit Reduction Act (DEFRA) of 1984 reinstated a new version of the Medicare separate reimbursement limits for hospital-based and freestanding SNF care that had been eliminated under TEFRA.

This rapid pace of change in the bases by which Medicare reimbursed hospitals for acute and post-acute care induced uncertainty among rural hospitals as to whether it was worthwhile electing the swing-bed option. This was reflected in the initial slow rate of applications by eligible hospitals ofr certification as a swing-bed facility. However, as the incentives provided by PPS at the acute and post-acute interface became clearer, the rate of election increased. This is reflected in Table 1 that shows the rate at which hospitals became certified to furnish swing-bed services.

By the end of 1983, about 18 months following the issuance of the regulations, only 149 of an estimated 2,236 hospitals eligible to elect the swing-bed option had done so. By mid-1987, the proportion was approaching the halfway point.

The increasing participation of hospitals in the provision of post-acute skilled nursing care services resulted in swing beds gaining an increasing share of the Medicare SNF market. As summarized in Table 2 and detailed in Table 3, admissions to swing-bed hospitals for SNF services increased from 3.0 percent of all Medicare SNF admissions in 1984 to 9.7 percent in 1987. the swing-bed share of Medicare-covered SNF days increased from 1.5 to 6.0 percent dureing the same period. Reimbursements for swing-bed care increased from 2.0 percent of SNF reimbursements in 1984 to 6.2 percent in 1987.

Shaughnessy, Schlenker, and Silverman (1988) reported findings that help to interpret the data in Table 3. They found that swing-bed patients have substantially shorter stays and greater rehabilitation potential than do nursing home patients. Swing-bed patients, in greater proportion than nursing home patients, were found to need intense medical and skilled care for such problems as recovery from surgery, hip fractures within the past 6 weeks, shortness of breath, and the need for intravenous catheters. Nursing homes tend to treat patients with problems more typically seen in institutional long-term care settings; such as, incontinence, impaired cognitive functioning, and dependence in carrying out activities of daily living (e.g., feeding self, dressing). Each type of facility seems particularly suited to care for patients who can be, respectively, characterized as needing intense subacute care or as the traditional long-term care patient. The evaluation concluded, "At the subacute phase, the quality of services furnished by hospitals was found to be better overall than those services furnished by nursing homes. On the other hand, nursing homes provide higher-quality, traditional, long-term care services."