What is the value of one extra day in a skilled nursing facility?

The use of post-acute care has grown substantially over the past few decades. Over 20% of Medicare beneficiaries are discharged to a skilled nursing facility (SNF) after a hospital stay, costing Medicare close to $30 billion in 2015. Recent Medicare payment policies provide incentives to decrease high-cost SNF care by reducing SNF length of stay. However, the consequences of reducing SNF length of stay are unknown.

We use data from 2012-2016 on all Medicare fee-for-service beneficiaries discharged from the hospital to SNF and estimate the effect of SNF length of stay on the following patient-level outcomes: readmission within 30 days of hospital discharge, death within 30 days of hospital discharge, Medicare payment for hospitalization, for SNF stay, and Medicare payment for the 90-day episode of care after hospital discharge including all Part A Medicare payments. To do so, we leverage changes in Medicare’s copayment for SNF on the 21^st day of a patient’s benefit period as an instrumental variable to isolate exogenous variation in SNF length of stay. Fee-for-service Medicare covers a maximum of 100 days per SNF benefit period. It fully pays for SNF care for the first twenty days within a benefit period, but on days 21 to 100 most patients are responsible for a daily copayment of over $150. Therefore, for each SNF admission, we measured the day of the benefit period at SNF admission and used that as an instrumental variable to predict SNF length of stay. We find this instrument strongly predicts SNF LOS (F-statistic 26,484) and patient covariates are balanced across values of the instrument.

From 2012 to 2016, there were 5,680,780 admissions to SNF for Medicare beneficiaries. Using OLS, one additional day in a SNF was associated with a 0.6 percentage point lower 30-day readmission rate (95% CI -0.6 to -0.6; P<.001) and 0.2 percentage point lower 30-day mortality rate (95% CI -0.2 to -0.2; P<.001). Total Medicare payment over the episode of care was $127 higher for each additional SNF day (95% CI 126 to 128; P<.001). The higher payment for the index SNF stays (by $339; 95% CI 337 to 341; P<.001) was partially offset by the lower payment due to reduced rehospitalizations (by -$93; 95% CI -94 to -92; P<.001). These results held in instrumental variable analyses and in sensitivity analyses.

These results suggest that longer SNF stays were associated with better patient outcomes, including lower readmission rates and lower mortality rates. However, these improved patient outcomes came at a cost to Medicare, with more spending on SNF stays which, in some cases, was partially offset by lower spending on hospitalizations over the subsequent 90 days.