Direct and Spillover Effects of Medicare Payment Changes on Nursing Home Quality and Volume

Swarthmore College, Swarthmore PA

Investigators

Abstract

Project Summary/Abstract This project examines the causal effects of Medicare payment rates on Skilled Nursing Facility (SNF) volume and quality by exploiting an exogenous geographic realignment that changed prospective payment rates to SNFs. Even as value-based payments develop, prospective payment systems (PPSs) remain important to healthcare providers and policymakers. In 2017, the Medicare Payment Advisory Committee (MedPAC) recommended freezing or reducing Medicare PPS payments for various healthcare providers and, in 2010, the Affordable Care Act (ACA) authorized $200 billion in Medicare payment cuts over 10 years. These types of payment cuts could significantly reduce healthcare providers' profits and have direct effects on the amount and quality of care provided to Medicare beneficiaries, as well as harmful spillover effects on quality and access for private-pay and Medicaid patients. The prior literature does not offer clear guidance on these effects. Most studies of Medicare SNF payment focus on the introduction of PPS and estimate the average effects of PPS across all facilities, even though some SNFs experienced increases in Medicare payments under PPS while others experienced decreases. Other studies that simulate facility-specific payment measures are subject to bias because simulated payments are endogenous. The long-term goal of this project is to understand how Medicare payment affects healthcare volume and quality both directly (for Medicare patients) and indirectly (through spillover effects onto other patients). This project has three specific aims: 1) to examine the causal effects of Medicare SNF payment changes on the volume of care provided to Medicare patients, Medicaid residents, and private-pay patients; 2) to examine the causal effects of Medicare SNF payment changes on quality of care, including overall facility quality, Medicare quality, and Medicaid quality; and 3) to examine how interactions between Medicare SNF payment policy and dimensions of the regulatory and state policy context affect the volume and quality of care provided to Medicare, Medicaid, and private-pay patients. By exploiting a change in the hospital wage index (HWI), an area-level adjustment to SNF payments, this project uses a policy-driven, facility-specific Medicare payment change that was unrelated to facility decisions and market conditions. This change allows for the use of a quasi-experimental design and creates a rare opportunity to estimate the causal effects of Medicare payment changes. This project will use facility-level panel data from Nursing Home Compare, the SNF Cost Reports, LTCfocus.org, and the Federal Register. Because of the similarity between the payment changes created by the HWI change and those in the ACA and recent MedPAC proposals, this work will provide evidence about how these subsequent changes will affect SNFs. This proposal also lays the groundwork for informing policymakers about the effects of the ACA's productivity adjustments for hospitals and other healthcare facilities. Importantly, the results will inform legislative debates about state certificate of need laws, state Medicaid payment policy, and federal antitrust regulations.