The underlying reasons for the high rates of SNF rehospitalization are numerous and complicated, but our results suggest part of the story relates to the presence and generosity of state Medicaid bed-hold policies. Specifically, states that adopt a bed-hold policy of average generosity (17 reimbursed days) have a 1.8 percent higher rehospitalization rate. Although nursing homes do not receive increased payment when Medicare SNF patients are rehospitalized, we posit that there is something about the culture in these facilities which makes it difficult, at the margin, to treat short-stay SNF and long-stay chronic care residents differently.
The results of our study contribute to the growing literature about how health care organizations practice in the face of heterogeneous financial incentives; that is, different insurance and reimbursement models associated with different patients. Previous research had found that Medicare policies affected Medicaid outcomes (Konetzka et al. 2006
). We have now showed the opposite to be true as well—Medicaid policies matter for Medicare patients. Under the current system, neither program has an incentive to enact payment policies that recognize the welfare of residents covered by the other program.
In the context of health care reform, there has been much recent discussion about Medicare payment reforms. One potential option on the table is to bundle all Medicare payments in order to incentivize more efficient resource use. Under a bundled system, a hospital and SNF might share in the savings from preventing a hospital readmission. As such, a hospital would have less incentive to discharge a patient prematurely to an SNF and the SNF would have less incentive to rehospitalize the patient. Skeptics of paying providers under a bundled system have raised a range of potential issues, including the increased incentives to create more bundles (volume response), selection of the most profitable patients, stinting on patient care, upcoding, fraud, and case mix adjustment. However, this paper raises an additional issue with bundled Medicare payment. Some of the empirical variation in SNF rehospitalizations relates to state Medicaid payment policies, which are largely outside the control of Medicare policy makers. Because a Medicare-only solution such as bundling will not take account of potential spillovers from Medicaid, policy makers will need to consider system-level solutions that engage Medicaid (Grabowski 2007
In taking a system-level perspective, this paper provides further evidence that Medicaid bed-hold is an outdated policy. These laws date back to the 1970s and 1980s when nursing homes had long waiting lists and operated at near capacity. In that era, the threat of a lost bed following hospitalization was quite salient. In today's nursing home environment, national occupancy rates are down below 90 percent and the threat of a lost bed for a hospitalized resident is much less apparent. Nevertheless, roughly 75 percent of states still have bed-hold policies in place. Previous research has suggested that these policies do indeed help to encourage continuity of care following a hospitalization (Intrator et al. 2009
), but they also stimulate additional hospitalizations among Medicaid residents (Intrator et al. 2007
). In balancing these competing forces, Intrator et al. (2009)
suggest that the increased likelihood of hospitalization under bed-hold likely overwhelms the potential benefits associated with returning back to the original nursing home following hospitalization. This paper adds to this story by suggesting that these policies help to foster a “hospitalization culture” in which nursing homes also increase Medicare rehospitalizations. Thus, these policies are often a “lose–lose–lose” for Medicaid (pays bed-hold), Medicare (pays rehospitalization), and the beneficiary (unnecessarily hospitalized). The only potential winners are nursing homes and hospitals that accrue additional payments as beneficiaries “churn” between settings.
Clearly, one way to balance the gains from bed-hold against the costs of increased hospitalization would be to better enforce minimum occupancy requirements. In certain states, any nursing home below a given occupancy level does not receive a payment when a Medicaid resident is hospitalized. Several states adopted or increased minimum occupancy requirements over our period of study. For example, Florida increased their minimum threshold from 80 to 95 percent in 2004 and Indiana adopted a 90 percent threshold in 2002. The potential concerns here are two-fold. First, in our discussions of bed-hold policy with state Medicaid officials, there has been the concern about calculating occupancy on a real-time basis using administrative data. Often, occupancy is calculated on a quarterly or an annual basis, which means true occupancy may be below the threshold at the time of hospitalization but over the threshold for a longer period. In an extreme example, one state official noted that the Medicaid office never actually monitored or enforced their bed-hold minimum occupancy requirement and simply took facilities at their word regarding occupancy. Second, even if bed-hold ensures that low-occupancy nursing homes do not receive a payment, these policies still contribute to a prohospitalization culture within nursing homes. As the results of this paper suggest, nursing homes do not need to receive a payment to increase hospitalizations in the context of a bed-hold policy. A stringent minimum threshold may not be enough to deter unnecessary hospitalizations.