The Impact of the Prospective Payment System on Nursing Home Care

What are the effects of the Medicare Prospective Payment System (PPS) for skilled nursing facilities (SNFs) on access to, and case-mix changes in, SNFs, and on outcomes for SNF patients in Ohio? The SNF PPS creates a fixed, all-inclusive, per diem reimbursement rate per patient, based on where that patient fits within a resource utilization group (RUGs) classification system. For some high-need RUGs, the cost of care may be higher than the per diem rate set by the SNF PPS due to increased pharmaceutical use, the costs of which may not have been fully assessed when calculating the per diem. The researchers hypothesized that instituting a prospective payment system may give SNFs the incentive to block access to care for patients who fall into more severe RUGs classifications, potentially reducing care options and increasing the risk of negative outcomes for frail elderly. The researchers 1) examined the effect of the SNF PPS on patient-level indicators, including access to SNFs, utilization of costly care (including pharmaceutical therapies whose costs go above the per diem cap) and re-hospitalization during high acuity episodes; and 2) examinedg the effect of the SNF PPS on facility-level indicators, such as case-mix, changes in SNF staffing and bed availability. The objective of this project was to better inform policymakers about the implications of prospective payment cost-reduction strategies on access to and quality of care through skilled nursing facilities.