Do Skilled Nursing Facilities Receive Adequate Reimbursement from Medicare

1
Do Skilled Nursing Facilities Receive Adequate
Reimbursement from Medicare?

• Chapin White, PhD
• National Bureau of Economic Research
• GSA Annual Scientific Meeting
• San Diego, November 25, 2003
• chapin_white_at_post.harvard.edu

2
Presentation Outline

• Background on Prospective Payment System
• The debate should payments be increased?
• The data
• aggregate trends in payments and supply
• by type of SNF (hospital-based vs freestanding)
• SNF-level change in payments market exit
• So, are payments adequate? Yes and no

3
Background

• Medicare SNF spending was rising rapidly (6b in
  '93 to 14b in '97)
• Balanced Budget Act of 1997 (BBA-97) ? new PPS
  for SNFs
• ended cost reimbursement
• per diem rates set by CMS
• adjusted for casemix and local wage index
• intended to be budget neutral
• compressed payment rates

4
The Debate

• AHCA Medicare payment rates are seriously
  limiting long term care professionals ability to
  deliver quality care. "Medicare cuts in 1997
  have ... stretched health providers' ability to
  meet patient needs" (www.ahca.org/brief/archived_r
  eleases/nr99310b.pdf )
• GAO "Medicare SNF payments are likely to provide
  sufficientand in some cases, even
  generouscompensation" (GAO/T-HEHS-00-192)

5
Research Questions

• How did SNF PPS affect payments?
• How did supply of services (days) change?
• Did SNFs exit? Which ones?

6
Note Medicare per diem equals total Medicare
payments, inflated to July 2001 using the
hospital producer price index, divided by total
Medicare-covered days.
7
Note Medicare per diem equals total Medicare
payments, inflated to July 2001 using the
hospital producer price index, divided by total
Medicare-covered days.
8
Note Medicare per diem equals total Medicare
payments, inflated to July 2001 using the
hospital producer price index, divided by total
Medicare-covered days.
9
Note Medicare per diem equals total Medicare
payments, inflated to July 2001 using the
hospital producer price index, divided by total
Medicare-covered days.
10
Note Medicare per diem equals total Medicare
payments, inflated to July 2001 using the
hospital producer price index, divided by total
Medicare-covered days.
11
Which SNFs Exited?

• Among SNFs active in 1997, which exited by end of
  2000?
• SNFs grouped by
• hospital-based vs freestanding
• for-profit vs nonprofit
• payment impact group
• boost (gt20)
• neutral (-20 to 20)
• cut (lt-20)

12
Freestanding SNFs Remained (blue) vs Exited (red)
Note SNFs are grouped according to predicted
change in inflation-adjusted Medicare per diems
("Cut" lt-20, "Neutral" -20 -- 20, "Boost"
gt20). Only SNFs that were active in 1997 are
included. SNFs that remained in the market
through 2000 are shown in blue, SNFs that exited
the market before the end of 2000 are shown in
red.
13
Hospital-based SNFs Remained (blue) vs Exited
(red)
Note SNFs are grouped according to predicted
change in inflation-adjusted Medicare per diems
("Cut" lt-20, "Neutral" -20 -- 20, "Boost"
gt20). Only SNFs that were active in 1997 are
included. SNFs that remained in the market
through 2000 are shown in blue, SNFs that exited
the market before the end of 2000 are shown in
red.
14
Conclusions

• For most freestanding SNFs, PPS neutral or
  positive
• But, big cuts for hospital-based SNFs
• ? many exited, especially for-profits
• For-profits fared worse (compression)
• Two industries, one payment system
• Raising payments is too blunt
• Payment levels adequate, system not