Medicare Prospective Payment and the
Volume and Intensity of Skilled Nursing
S i
Services
David C. Grabowski
Christopher Afendulis
Thomas G. McGuire
Harvard Medical School
Funding: National Institute on Aging (R01 AG030079)
Background
• NH market
k t consists
i t off two
t
distinct
di ti t patient
ti t
populations
– Chronically ill
ill, long-stay
long stay residents,
residents financed by
Medicaid and out-of-pocket payments
• Asset/income tests to qualify for Medicaid
– Post-acute,
Post ac te short-stay
short sta residents financed by
b Medicare
• With a prequalifying hospitalization
• 100-day benefit
• In 1981, Medicare accounted for 1.6% of NH
expenditures,
dit
b
by 2006
2006, thi
this h
had
d iincreased
d tto
16.7%
Growth in Medicare
• IIn the
th 1970s
1970 and
d early
l 1980
1980s, M
Medicare
di
SNF was
deemed an “underused benefit” (Scanlon and Feder
1982))
• SNFs paid based on costs
– Routine, ancillary and capital cost centers
• Medicare hospital PPS adopted in 1983, which led to
patients being discharged “sicker and quicker”
• CMS’ stringent interpretation of coverage/eligibility
criteria held SNF market growth in check
• Late 1980s, these guidelines were relaxed
• “A hole in Medicare policy through which one could drive a truck” Bruce Vladeck, former CMS commissioner
Medicare SNF Expenditures
Expenditures, 1981
1981-97
97
$12,000
$8,000
$6,000
Issuance of
MCCA
Revised Guidelines
$4,000
Hospital PPS
$2,000
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
$0
1981
Do
ollars in M
Millions
$10,000
Medicare Payment Reforms
• Medicare adopted a per diem prospective
payment
p
y
system
y
((PPS)) beginning
g
g with the
start of facility FY on/after July 1, 1998
– Resource Utilization Groups (RUGS
(RUGS-III)
III) is
used to place each resident into one of 44
payment categories based on casemix
casemix, ADLs
ADLs,
cognitive impairment and therapy
• More therapy minutes = higher RUGS
RUGS-based
based
payment
Medicare Payment Reforms (cont
(cont.))
• A
Aprilil 1
1, 2000
2000: B
Balanced
l
dB
Budget
d tR
Refinement
fi
tA
Actt (BBRA)
provided 20% increase in 12 RUGs dealing with
"complex
p
care",, and 3 of the rehab RUGs (RHC;
(
; RMC;;
RMB); 4% increase for other RUGs
• April 1, 2001: Benefits Improvement and Protection Act
(BIPA) provided
id d 16.6%
16 6% iincrease ffor nursing
i component;
t
removed the 20% increase for the three rehab RUGs;
and,
a
d, p
provided
o ded a 6
6.7%
% increase
c ease for
o a
all 14 rehab
e ab RUGs
UGs
• September 30, 2002: BIPA 16.6% increase expires
g p RUGs system
y
• Januaryy 1, 2006: New 53-group
implemented
Objectives
• Test the effects of Medicare SNF payment
reforms on:
– Medicare utilization
– Provision of rehabilitation therapy
– Amount of therapy
– Length-of-stay
Data
• F
Facility-level.
ilit l
l Online
O li S
Survey C
Certification
tifi ti and
d
Reporting (OSCAR) system for the entire US
over 1996-2004
1996 2004
– Roughly annual survey w/ point-in-time Medicare
utilization
– 17,544
17 544 unique
i
ffacilities;
iliti
128
128,480
480 observations
b
ti
• Person-level. Minimum Data Set (MDS)
assessments
t for
f new NH admissions
d i i
iin NY
State, 1999-2004
– 548
548,077
077 residents from 690 nursing homes
– NY State was a PPS demonstration state
Outcomes
• Facility-level
F ilit l
l
– Medicare utilization
– Medicare
M di
share
h
(%)
• Person-level:
P
l
l
–
–
–
–
–
14 rehabilitation RUGs (0/1)
6 high rehab RUGs (0/1)
Therapy minutes/week
LOS<30 days (0/1)
LOS<90 days (0/1)
Facility Level National Results
Facility-Level
• Diff-in-diff model (98-00) based on FY
timing:
g
– SNFs had roughly one fewer (~9%) Medicare
resident following SNF PPS
• Full panel (96-04) model w/ linear trend
– Most of the decline in Medicare utilization
returned during BBRA and BIPA periods
Person Level NY State Results
Person-Level
• Diff-in-diff: Compares the
th pre-postt PPS
difference in utilization among
g
Medicare admissions in facilities that
did and did not adopt PPS
• Diff-in-diff-in-diff: Compares the change in
the gap in the intensity of service use
between Medicare and non-Medicare
admissions in facilities that did and did not
adopt the PPS
Person level Results
Person-level
• Following SNF PPS:
•
•
•
•
4.4%-4.7%
%
% increase in rehab RUGs
3.1%-8.9% increase in high rehab RUGs
6 5% 15 8% increase in therapy minutes
6.5%-15.8%
No stat signif effect on LOS
• Following BBRA, BIPA
• No major
j changes
g in rehab,, therapy
py minutes,, LOS
Summary
• PPS led to a one-time decrease in growth
of SNF Medicare volume but Medicare
intensity increased
• Little effect of PPS on length
length-of-stay
of stay
• During the BBRA and BIPA periods in
which SNF payment generosity was
enhanced, volume returned to pre-PPS
pre PPS
levels with little shift in intensity
Medicare SNF Expenditures
Expenditures, 1981
1981-2006
2006
$20 000
$20,000
$15,000
PPS
$10,000
$5,000
BBRA BIPA
Issuance of
Revised Guidelines
Hospital PPS
MCCA
05
20
03
20
01
20
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
83
19
81
$0
19
Dollars in M
Millions
$25,000
Herb Stein
One of the few things we know
about unsustainable trends is that
they won't be sustained.
Potential Reforms
•
Prospectivity of the system? Although Medicare currently bases SNF
payment on the RUGs system:
– the payment is per diem
– For rehab, the payment can increase based on delivery of more therapy minutes
•
Mixed system?
– Episode is paid partly prospectively and partly cost-based (Ellis and McGuire,
1986; 1990)
– Balances incentives under pure prospective versus pure cost-based payment
•
Episode payment? “The
The variability of length
length-of-stay
of stay – and thereby episode
cost – is too great to practically implement an episode-based prospective
pricing mechanism.” – CMS Final Report on NH Casemix Demo, Abt 2002
– Yet, we pay HHAs under episode-based payment and we are considering
bundled payments around hospital episodes under health reform
reform…