Physical rehabilitation following Medicare prospective payment for skilled nursing facilities

Health Services Research, Oct, 2004 by Walter P. Wodchis

To control for differences in payment rates, additional indicator variables are used to identify residents for whom the primary payer for rehabilitation is Medicare Part B or Medicaid (throughout the article, however, any reference to Medicare residents represents coverage under Medicare Part A). Empirically, private-pay nursing home residents provide the comparison group for all public payers and constitute the reference category in regression analyses. This assignment is made because the private payment method is consistent across jurisdictions and time. In the private market, access and treatment decisions are individually determined for each resident based on market price. An additional interaction term is created using the post-PPS indicator and Medicaid payment to identify any changes in Medicaid resident use of rehabilitation therapy (potentially due, for example, to changes in cross-subsidization of services between Medicare and Medicaid, or spillover from post-PPS changes in the supply of therapists). Because Medicaid copayment may also influence rehabilitation, a separate indicator is added to identify residents where Medicaid is listed as a secondary payer.

An extensive array of resident-level diagnoses and conditions along with state of residence are used to control for resident heterogeneity and potential selection bias. Because residents are clustered within facilities and resident sorting among facilities may be correlated with payment source, ordinary least squares regression estimates may be biased. Thus, robust standard errors are used throughout the analysis. Fixed and random-effects estimation results are compared.

Data and Sample Selection

Resident data are based on Minimum Data Set (MDS) resident assessments. The MDS is a comprehensive assessment containing more than 400 items including resident demographics, payment source, diagnosis, functioning, and treatment, and is mandated for use in all U.S. nursing homes. Assessments are completed on resident admission to the nursing home, every 90 days, and on significant change in health status or care needs. The reliability and validity of the MDS instrument for research purposes has been demonstrated in repeated studies (Hawes et al. 1995; Morris et al. 1997; Sgadari et al. 1997). The Online Survey and Certification File (OSCAR) was used to determine when PPS began for an individual facility and to identify SNF certification. The OSCAR database includes all Medicare/Medicaid certified nursing facilities in the U.S. and is commonly used to study provider characteristics (Harrington and Carrillo 1998; Harrington et al. 2000).

Residents in this study are aged 65 years and older and were admitted to facilities in 1998 or 1999. The first observed (entry) assessment is retained for analyses. The total population of nursing home residents is 108,576. To ensure all residents had access to rehabilitation, only residents in SNFs that provided rehabilitation therapy are included (8,624 residents excluded). The selections do not limit the study to skilled nursing residents who receive rehabilitation therapy but do ensure the availability of rehabilitation. The exclusions do not completely account for all types of resident sorting among facilities. However, studies that examined both nursing homes and specialized facilities found little difference between settings in characteristics of residents receiving rehabilitation (Kramer et al. 1997; Schlenker et al. 1997). The final analytical sample is 99,952 residents.