What happens when hospital-based skilled nursing facilities close? A propensity score analysis

Health Services Research, Dec, 2005 by Chapin White, Susanne Seagrave

Medicare Spending

The effects of HBSNF closures on Medicare spending parallel the effects on utilization. HBSNF closures are associated with sharp decreases in Medicare spending for HBSNF services, and substantial increases in hospital spending, freestanding SNF spending, and spending on other postacute settings. HBSNF closure is associated with $254.57 in additional payments to acute care hospitals for each initiating hospital stay (i.e., not including rehospitalizations). The higher hospital payments appear to result from a decrease in early transfers (note that early transfers result in reduced hospital payments) rather than an increase in outlier payments. In terms of total episode spending, the sharp decrease in HBSNF spending was offset by increased spending on alternative postacute settings. Because of offsetting postacute use and increased hospital payments, HBSNF closure was associated with a statistically significant increase in total episode payments of $342.86 per episode.

Outcomes

The results of the propensity score analysis do not indicate a statistically robust association between HBSNF closures and health outcomes. HBSNF closure was associated with an increased probability of rehospitalization in propensity groups 3 and 5, but this finding was not consistent across propensity groups and was only marginally statistically significant in the pooled results. In propensity group 5, HBSNF closure is associated with a slight decrease in 30-day mortality, although the pooled 30-day mortality result is only marginally statistically significant. Of the other health outcomes examined--120- and 360-day mortality, and rehospitalization with a potentially preventable condition--none showed any statistically robust associations with HBSNF closures.

DISCUSSION

HBSNF closures from 1997 to 2001 were associated with substantial shifts in the site of service for postacute care services and in the distribution of Medicare payments for these services. These results indicate that HBSNF closures are associated with a slight increase in total Medicare spending, which is surprising given the magnitude of the associated reduction in HBSNF spending. This suggests that some patients who would have received care in the HBSNF setting receive care instead in other cosily settings, such as long-term care hospitals and inpatient rehabilitation facilities.

HBSNF closures had a statistically significant but relatively small effect on the length of stay in the acute care hospital setting. Anecdotal evidence suggested that the primary motivation for acute care hospitals to open SNF units was to lower the length of stay and receive additional payments for patients who would otherwise remain in the hospital. If HBSNFs did, in fact, contribute to lowering the hospital length of stay, the closure of the HBSNFs did not substantially reverse this effect.

The results have two main implications for policymakers. The first is that provider exits in response to payment cuts, as occurred among HBSNFs, do not necessarily lead to access problems. The availability of substitute sites of care can mitigate the impact of payment cuts. The second implication is that Medicare's payment policies for different types of providers should be viewed as an interconnected whole. Payment policy for one type of provider, such as HBSNFs, clearly affects utilization and spending among other providers.