Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Early Effects of the 
Prospective Payment System 
on Access to Skilled Nursing Facilities 
JUNE GIBBS BROWN 
Inspector General 
AUGUST 1999 
OEI-02-99-00400  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to 
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them.  This statutory mission is carried out through a 
nationwide program of audits, investigations, inspections, sanctions, and fraud alerts.  The 
Inspector General informs the Secretary of program and management problems and recommends 
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's New York regional office prepared this report under the direction of John I. Molnar, 
Regional Inspector General, and Renee C. Dunn, Deputy Regional Inspector General.  Principal 
OEI staff included: 
REGION*  HEADQUARTERS 
Jodi Nudelman, Project Leader  Jennifer Antico, Program Specialist

Miriam Gareau  Barbara Tedesco, Statistician

Judy Lin  Scott Horning

Steve Shaw  Linda Moscoe

*All staff in the New York Regional Office and some staff in the Chicago Regional Office, led by

Ann Maxwell, participated in the data collection.

To obtain copies of this report, please call the New York Regional Office at (212) 264-2000. 
Reports are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  E X E C U T I V E  S U M M A R Y  
PURPOSE 
To identify any early effects of the nursing home prospective payment system on Medicare 
beneficiaries access to skilled nursing facilities. 
BACKGROUND 
The Health Care Financing Administration (HCFA) asked the Office of Inspector General to 
assess whether the new prospective payment system for skilled nursing facilities (SNFs) is causing 
access problems for Medicare beneficiaries.  The Balanced Budget Act of 1997 changed SNF 
reimbursement to a prospective payment system.  Beginning with their first cost reporting period 
after July 1, 1998, SNFs are paid through per diem, prospective, case-mix adjusted payments 
which cover routine, ancillary, and capital-related costs.  Concerns have been raised about the 
adequacy of the payments and the effect of the new system on patients and on nursing homes. 
To address these concerns, we contacted a random sample of hospital discharge planners who are 
responsible for coordinating nursing home care for patients being discharged from hospitals.  We 
asked them about their ability to place Medicare patients in nursing homes and about changes in 
nursing home admissions practices.  Our analysis is primarily based on patients who are likely to 
leave the nursing home when their Medicare Part A coverage ends.  We also examined Medicare 
data related to SNF discharges and hospital length of stay. 
FINDINGS 
So far, no serious problems in placing Medicare patients in 
nursing homes are apparent.  However, nursing homes are 
changing their admissions practices in response to the 
prospective payment system. 
Generally, discharge planners report that they can place Medicare patients. 
Most discharge planners (66 percent) report that it is not at all difficult to place patients in 
nursing homes when their stay will be paid under the Medicare prospective payment system. 
Another 32 percent say that it is somewhat difficult, while 1 percent report that it is very 
difficult.  Discharge planners do not indicate that they are unable to place these patients.  They 
commonly explain that nursing homes generally want Medicare patients because they are short-
Early Effects of PPS on Access to SNFs  1  OEI-02-99-00400  term or because nursing homes are reimbursed at a higher rate for these patients than for 
Medicaid patients.  At the same time, about a fifth believe that it has become more difficult to 
place Medicare patients in the past year because of the new prospective payment system.  Also, 
44 percent of discharge planners report that it has become more difficult to place patients whose 
Medicare Part A coverage will likely end before they are discharged and who will then become 
Medicaid residents.  However, discharge planners do not generally attribute this to the 
prospective payment system. 
Medicare data show no changes in nursing home placements. 
Medicare data confirm that Medicare patients are still being placed in nursing homes.  Specifically, 
these data do not show any change in where patients are being placed and in the types of 
Medicare patients who are being placed in nursing homes.  In addition, Medicare data indicate an 
increase in the total number of Medicare beds, which is a key factor in nursing home access. 
Nursing homes are changing their admissions practices in response to the 
prospective payment system. 
About half of all discharge planners report that nursing homes have changed their admissions 
practices as a result of the new prospective payment system.  Discharge planners explain that 
nursing homes request more detailed clinical information about the patient and are more 
consistently coming to the hospital to directly assess the patient before making admissions 
decisions. 
The patients who have become harder to place are those who need extensive 
services. 
When asked which types of patients have become more difficult to place, the majority of 
discharge planners (58 percent) identify patients who require extensive services.  They specifically 
mention patients who require intravenous feedings, intravenous medications, tracheostomy care, 
or ventilator/respirator care.  Discharge planners report that some types of special care and 
clinically complex patients have also become more difficult to place in the past year. 
On the other hand, the patients who have become easier to place are those who 
need rehabilitation services. 
Most discharge planners (69 percent) report that Medicare patients who need special 
rehabilitation have become easier to place in nursing homes in the past year.  They most 
commonly state that orthopedic patients, who have had a hip or knee fracture or joint 
replacement, and stroke patients, who require intensive short-term rehabilitation, have become 
easier to place.  It is important to note that special rehabilitation is reimbursed at the highest rate 
under the prospective payment system. 
Early Effects of PPS on Access to SNFs  2  OEI-02-99-00400  CONCLUSION 
It appears that in an early response to the prospective payment system, some nursing homes have 
modified their admission practices.  However, despite this practice change, there is no direct 
evidence that Medicare patients are not receiving the SNF care they require.  This is partly due to 
an overall increase in the number of Medicare beds and to the fact that Medicare continues to 
reimburse at a higher rate than Medicaid, which is the primary payer of nursing home care. 
We stress that this is an early assessment of the effects of the prospective payment system on 
access.  We believe that the Department must remain vigilant to potential problems for Medicare 
patients and for nursing homes.  As part of this effort, we will periodically replicate this study of 
discharge planners and analysis of Medicare data.  We will particularly focus on the types of 
patients who were identified as being more difficult to place.  Additionally, we suggest that the 
Administration on Aging (AoA) alert long-term care ombudsmen to potential admissions 
problems in their areas.  The AoA also needs to monitor related National Ombudsmen Reporting 
System data for patterns of abuse. 
COMMENTS 
We received comments on the draft report from the Health Care Financing Administration.  They 
generally agree with our findings and our conclusion and note that our report is consistent with 
the early findings of their ongoing monitoring efforts.  A copy of their comments is provided in 
Appendix B. 
Early Effects of PPS on Access to SNFs  3  OEI-02-99-00400  T A B L E  O F  C O N T E N T S  
PAGE

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

FINDINGS

Discharge Planners Can Place Medicare Patients  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Data Show No Changes in Placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8

Nursing Homes are Changing Admissions Practices  . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Extensive Services Patients More Difficult to Place  . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Rehabilitation Patients Easier to Place  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Mixed Evidence about Patient Hospital Stays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

CONCLUSION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17

APPENDIX A  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18

APPENDIX B  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19

Early Effects of PPS on Access to SNFs  4  OEI-02-99-00400  I N T R O D U C T I O N  
PURPOSE 
To identify any early effects of the nursing home prospective payment system on Medicare 
beneficiaries access to skilled nursing facilities. 
BACKGROUND 
The Health Care Financing Administration (HCFA) asked the Office of Inspector General to 
assess whether the new prospective payment system for skilled nursing facilities (SNFs) is causing 
access problems for Medicare beneficiaries.  Concerns have been raised about the adequacy of the 
payments and the effect of the new system on patients and on nursing homes. 
Skilled nursing facility care is covered by Medicare Part A under certain conditions.  Specifically, 
the patient must have been hospitalized for three or more days within the last 30 days for the 
condition that will be treated in the SNF.  The SNF stay must also be certified as medically 
necessary and the patient must require daily skilled nursing or skilled rehabilitation services.  The 
number of SNF days provided under Medicare is limited to 100 days per benefit period, with a 
co-payment required for days 21 through 100. 
In 1989, Medicare paid $2.8 billion to nursing homes, or about  4.7 percent of the Medicare 
budget.  In 1997, this amount increased to $12.2 billion, which was 5.9 percent of the Medicare 
budget. 
Medicare Payments to Nursing Homes 
Medicare Part A payments for SNF care cover routine costs such as the room, dietary service, 
nursing service, minor medical supplies, and social service.  Payments also cover capital costs for 
the building and equipment, and ancillary care for specialized services such as therapy, laboratory 
tests, and transportation.  Until recently, SNFs were reimbursed on a retrospective, reasonable 
cost basis. 
The Balanced Budget Act of 1997 changed SNF reimbursement to a prospective payment system 
in order to control Medicare Part A program costs.  Beginning with the SNFs first cost reporting 
period after July 1, 1998, SNFs are paid through per diem, prospective, case-mix adjusted 
payments which cover routine, ancillary, and capital-related costs.  The per diem payment is based 
on fiscal year 1995 Part A & B costs adjusted using the SNF market basket index (minus 1 
percent), case-mix from resident assessments, and geographical wage variations.  The market 
Early Effects of PPS on Access to SNFs  5  OEI-02-99-00400  basket index represents an inflation factor.  The case-mix index recognizes that SNF residents 
require different levels of care and is based on an assessment that assigns each resident to one of 
44 Resource Utilization Groups (RUGS-III).  This new payment system is being phased in over a 
three year transition period. 
Discharge Planners 
By definition, all Medicare Part A beneficiaries in SNFs are discharged from hospitals.  Hospital 
discharge planners who are responsible for coordinating SNF care are therefore in a unique 
position to assess any early effects of the prospective payment system on access to nursing home 
care. 
Federal regulations require all hospitals to offer discharge planning services.  The goal of these 
services is to identify a patients post-hospital needs and ensure that he or she is discharged to a 
safe environment with the appropriate level of services.  In most hospitals, the social work, case 
management, or utilization review department has primary responsibility for discharge planning. 
They place patients in a variety of settings including SNFs, home health care, hospices, or 
intermediate care. 
Discharge planning staff generally follow a standard process.  In a typical scenario, staff screen 
patients records within 24 hours of admission.  They attempt to identify patients who will require 
discharge planning services, such as those who are 65 years and older and living alone or those 
with possibly life-threatening illnesses.  They then conduct a psycho-social assessment and discuss 
the patients care plan with his or her nurses and physicians, as well as utilization review staff, and 
other relevant interdisciplinary team members.  Discharge planners also solicit the patients 
preferences and contact family members or other potential caregivers to get their input and 
cooperation.  Based on this information, they attempt to place the patient in the most appropriate 
setting. 
Nursing Home Concerns 
The nursing home industry has raised several concerns about the new reimbursement system. The 
industry believes that the system is causing considerable pressure on SNFs and that it will reduce 
payments to these facilities.  In media reports, industry representatives have expressed concern 
that the new system may cause some SNFs to go out of business. 
METHODOLOGY 
We conducted this inspection in two stages.  First, we conducted a survey of hospital discharge 
planners.  To do this, we randomly selected a total of 200 hospitals in eight States.  We contacted 
each hospital and sought to interview the discharge planning supervisor or the staff person who 
Early Effects of PPS on Access to SNFs  6  OEI-02-99-00400  was most familiar with the study issues.  We were able to interview a total of 180 discharge 
planners between June 16, 1999 and June 25, 1999.  We specifically asked respondents about 
their ability to place different types of patients in nursing homes and about changes in nursing 
home admissions practices in the past year.  In order to isolate the effect of the new payment 
system, our analysis is primarily based on patients who are likely to leave the nursing home when 
their Medicare Part A coverage ends.  However, we also asked questions about patients who are 
likely to outstay their Medicare Part A coverage. 
Second, we reviewed Medicare data from two sources.  Specifically, we analyzed trends in the 
number of nursing home beds using data from the Provider of Services (POS) File which is based 
on the Online Survey Certification and Reporting System (OSCAR).  We also analyzed post-
hospital services from a one percent sample of Medicare beneficiaries from the Medicare National 
Claims History File. 
Sample Selection 
We selected a two-stage stratified cluster sample for this inspection.  The first stage of sampling 
was a stratified sample of eight States: 
the four States with the most SNF beds (CA, NY, IL, TX);

two of the four States currently using a Medicaid prospective payment system (MS, ME); 

two States randomly selected from the remaining 40 contiguous States (VA, CT).

At the second stage, we selected a simple random sample of 25 hospitals within each of these 
States.  This State sample is the same as the one used for two related studies being conducted by 
the Office of Inspector General.  These forthcoming studies are:  Nursing Home Financial 
Screening and Distinct Part Rules, OEI-02-99-00340 and Nursing Home Resident Assessment, 
OEI-02-99-00040. 
Limitations 
The findings in this report are primarily based on self-reported data that were not independently 
verified.  Further, this report is limited to identifying only early effects of the new reimbursement 
system.  The majority of SNFs started shifting to the prospective payment system as of January 1, 
1999.  In addition, the most recent Medicare data that were available for this report include the 
first five months of 1999.  Note that time lags may occur and that these data may not be complete. 
This inspection was conducted in accordance with the Quality Standards for Inspections issued 
by the Presidents Council on Integrity and Efficiency. 
Early Effects of PPS on Access to SNFs  7  OEI-02-99-00400  F I N D I N G S  
So far, no serious problems in placing Medicare patients in 
nursing homes are apparent.  However, nursing homes are 
changing their admissions practices in response to the 
prospective payment system. 
The following findings present a more detailed discussion of Medicare beneficiaries access to 
nursing home care.  They also describe early effects on access due to changes in nursing home 
admissions practices. 
Generally, discharge planners report that they can place Medicare patients. 
Most discharge planners (66 percent) report that it is not at all difficult to place patients in 
nursing homes when their stay will be paid under the Medicare prospective payment system. 
Another 32 percent say that it is somewhat difficult, while 1 percent report that it is very 
difficult.  Discharge planners do not indicate that they are unable to place these patients.  They 
commonly explain that nursing homes generally want Medicare patients because they are short-
term or because nursing homes are reimbursed at a higher rate for these patients than for 
Medicaid patients.  Some discharge planners also note that there is an adequate number of beds 
available in their area and therefore it is not difficult to place these patients.  Further, most 
discharge planners (60 percent) report that nursing homes never or rarely refuse Medicare patients 
because they do not have a Medicare certified bed available. 
At the same time, about a fifth of all discharge planners believe that it has become more difficult 
to place Medicare patients in the past year because of the new prospective payment system.  Also, 
44 percent of discharge planners report that it has become more difficult to place patients whose 
Medicare Part A coverage will likely end before they are discharged and who will then become 
Medicaid residents.  However, discharge planners do not generally attribute this to the 
prospective payment system. 
Medicare data show no changes in nursing home placements. 
Medicare data generally support discharge planners views.  The data indicate that Medicare 
patients are still being placed in nursing homes.  Specifically, the data show no change in where 
Medicare patients are being placed.  As shown in Table 1, the proportion of all Medicare hospital 
discharges that went to SNFs does not differ between the first five months in 1998, which is prior 
to the implementation of the prospective payment system and the same five months in 1999, 
which is after the implementation of the new system. 
Early Effects of PPS on Access to SNFs  8  OEI-02-99-00400  Table 1

Distribution of Medicare Discharges to Post Hospital Services,

First Five Months of 1998 and 1999

January to May  January to May 
1998  1999 
Post Hospital  Percent of  Percent of  Difference 
Service  Total Discharges  Total Discharges  1998-1999 
Home  58.7  57.2  -1.5 
SNF  15.6  15.4  -0.2 
Home Health  9.8  10.8  1.0 
Intermediate Care  2.5  3.1  0.6 
Other  13.5  13.5  0.0 
Source: Medicare National Claims History File 
The data also do not show any large changes in the types of Medicare patients who are being 
placed in nursing homes.  As shown in Table 2, there are no substantial differences in the 
diagnoses of patients who were discharged to SNFs in the first five months of 1998 compared to 
the same time period in 1999.  The ten most common diagnoses discharged to SNFs are the same 
in both years. 
There are small differences in the proportion of discharges to SNFs for a few of the individual 
diagnoses.  The largest difference is the proportion of discharges to SNFs for stroke patients. 
This proportion decreased by 1.4 percentage points from the first five months of 1998 to the same 
period in 1999. 
Early Effects of PPS on Access to SNFs  9  OEI-02-99-00400  Table 2

Distribution of Medicare Discharges by Diagnosis Related Groups,

First Five Months of 1998 and 1999

January to May  January to May 
1998  1999 
Percent of  Percent of  Difference 
DRG  Description  Discharges to  Discharges to  1998-1999 
SNFs  SNFs 
209  Major joint limb reattachment  7.2  6.6  -0.5 
089  Simple pneumonia and pleurisy  6.9  7.2  0.4 
014  Specific cerebrovascular disorders  6.0  4.5  -1.4** 
127  Heart failure and shock  5.1  5.0  -0.0 
079  Respiratory infections and inflammation  3.7  3.9  0.2 
210  Hip and femur procedures  3.5  4.0  0.5 
416  Septicemia  3.0  3.1  0.1 
296  Nutritional/misc. metabolic disorders  2.9  3.3  0.4 
088  Chronic obstructive pulmonary disease  2.6  2.5  -0.2 
320  Kidney and urinary tract infections  2.5  2.9  0.4 
**Statistically significant at the .01 level. 	 Source: Medicare National Claims History File 
Note: Differences may be due to rounding. 
Further, it is important to note that the most recent available data show that at the time that the 
prospective payment was implemented, the total number of discharges to SNFs was increasing. 
As shown in Table 3, in 1996, there were about 1.7 million discharges to SNFs, which amounted 
to about 13.6 percent of all Medicare hospital discharges.  In 1998, the number of discharges to 
SNFs increased to approximately 1.8 million, which was about 15.3 percent of all Medicare 
hospital discharges.  (Similar data are not available for 1999.) 
Early Effects of PPS on Access to SNFs  10  OEI-02-99-00400  Table 3

Distribution of Medicare Discharges to Post Hospital Services,

1996 to 1998

1996  1997  1998 
Post Hospital  Percent of  Percent of  Percent of  Difference 
Service  Total  Total  Total  1996-1998 
Discharges  Discharges  Discharges 
Home  60.1  59.0  58.9  -1.2 
SNF  13.6  14.5  15.3  1.6 
Home Health  10.8  10.7  9.8  -1.0 
Intermediate  2.4  2.4  2.6  0.2 
Care 
Other  13.1  13.4  13.4  0.3 
Source:  Medicare National Claims History File 
Note: Differences may be due to rounding. 
Two-thirds of discharge planners also report that the total number of Medicare patients they 
discharge to nursing homes has increased over the past two years.  Most of these respondents 
suggest that this increase is due to a greater number of patients who are elderly and who need 
skilled care.  They also note that patients are staying in the hospital for shorter periods of time and 
that some are leaving sicker and therefore more likely to need skilled care.  Few discharge 
planners (7 percent) mention that changes in the number of Medicare patients discharged to 
nursing homes are the result of the new prospective payment system. 
In addition, annual Medicare data show an increase in the total number of Medicare beds, which is 
a key factor in nursing home access.  As shown in Table 4, in 1998, there were approximately 
17,300 nursing facilities with about 1.86 million nursing home beds nationwide.  About 722,000 
of these beds, or nearly 40 percent, were Medicare certified.  Since 1996, the total number of 
Medicare certified beds has increased by 7 percent.  Thus, an increase in capacity was occurring 
just as the new perspective payment system was coming on-line. 
Early Effects of PPS on Access to SNFs  11  OEI-02-99-00400  Table 4

Total Number of Nursing Home Beds, 1996 to 1998

Percent Change 
1996  1998  1996-1998 
Nursing 
Total Beds  1,848,335  1,861,281  0.7% 
Total 
Medicare Beds  672,329  722,278  7.4% 
Source:  Provider of Services File 
Discharge planners generally confirm these national trends.  The majority (93 percent) state that 
the total number of nursing home beds in their area has remained the same or has increased over 
the past two years.  Further, more discharge planners report an increase in the number of 
Medicare certified beds than those who report an increase in all nursing home beds.  Less than 10 
percent of discharge planners attribute changes in the supply of nursing home beds in their area to 
the new prospective payment system. 
In addition, about eight percent of discharge planners report that they are aware of a nursing 
home closing in their area in the past year.  One percent report that a nursing home has closed as 
the result of the prospective payment system.  Others believe that these closures are due to poor 
management or fraud.  Note that we did not independently verify these reports. 
Nursing homes are changing their admissions practices in response to the 
prospective payment system. 
About half of all discharge planners report that nursing homes have changed their admissions 
practices as a result of the new prospective payment system.  Nearly two-thirds state that the new 
system has had some effect on their ability to place Medicare patients in nursing homes. 
Discharge planners explain that in the past year nursing homes have requested more detailed 
clinical information about patients.  They note that nursing homes are increasingly looking at the 
cost of care and of services before making admissions decisions.  In some cases, nursing homes 
review the cost of patients medications.  Discharge planners also observe that nursing home staff 
are more consistently coming to the hospital to directly assess the patient.  About 20 percent of all 
discharge planners specifically note that nursing homes are less willing to accept patients 
Early Effects of PPS on Access to SNFs  12  OEI-02-99-00400  with certain medical conditions because of the prospective payment system.  A similar proportion 
also say that nursing homes will only take patients for whom they will be reimbursed at a high 
rate. 
The patients who have become harder to place are those who need extensive 
services. 
When asked which types of Medicare patients have become more difficult to place in nursing 
homes, the majority of discharge planners (58 percent) identify patients who require extensive 
services.  (See Table 5.)  These types of patients typically require complex direct nursing care and 
expensive medications.  They include patients who require intravenous feedings, intravenous 
medications, tracheostomy care, or ventilator/respirator care. 
Discharge planners report that some types of special care and clinically complex patients have also 
become more difficult to place in the past year.  Specifically, they mention patients who need 
dialysis and patients who have surgical wounds or open lesions that require substantial direct 
nursing care time and special supplies and medications. 
Additionally, discharge planners comment that in the past year some other types of patients have 
become harder to place.  These include patients who require isolation, especially those with 
antibiotic resistant infections, patients who have multiple diagnoses, and patients with behavior 
problems. 
Several discharge planners suggest that some of these patients may be harder to place because the 
cost of their care may be higher than the amount that nursing homes are reimbursed under the 
prospective payment system.  A few discharge planners note that nursing homes have told them 
that some of the supplies and equipment required by extensive services patients, such as IV 
medications and ventilators, are too costly for them to provide under the new reimbursement 
system.  Several also observe that nursing homes are reluctant to accept patients with high 
transportation costs, especially dialysis patients, because the cost of transporting these patients 
may exceed the amount that nursing homes are reimbursed for these patients under the 
prospective payment system. 
Early Effects of PPS on Access to SNFs  13  OEI-02-99-00400  Table 5

Clinical Conditions That Have Become Harder to Place in the Past Year

Clinical Condition*  Percent of 
Discharge Planners 
Dialysis  33.8 
IV Medications  31.5 
Ventilator/Respirator  28.8 
Surgical Wounds or Open Lesions  17.7 
Isolation/Antibiotic Resistant Infection  15.2 
IV Feedings  15.0 
Multiple Conditions  10.6 
Behavior Problems  10.5 
Alzheimers  6.7 
Tracheostomy Care  5.9 
Radiation Treatment  5.6 
Chemotherapy  4.7 
Septemia  4.6 
Dementia  4.0 
Diabetes  3.4 
* Categories are not mutually exclusive  Source: OEI Discharge Planning Survey, 
June 1999 
The patients who have become easier to place are those who need rehabilitation 
services. 
Most discharge planners (69 percent) report that Medicare patients who need special 
rehabilitation have become easier to place in nursing homes in the past year.  (See Table 6.)  They 
most commonly report that orthopedic patients, who have had a hip or knee fracture or joint 
replacement, and stroke patients, who require intensive short-term rehabilitation, have become 
easier to place.  At the same time, some discharge planners do not cite specific diagnoses, but 
rather comment that patients who require rehabilitation therapy such as physical, occupational, or 
Early Effects of PPS on Access to SNFs  14  OEI-02-99-00400  speech therapy have become easier to place.  Several discharge planners explain that patients 
needing rehabilitation generally have short stays in nursing homes and become independent in 
activities of daily living quickly.  Further, it is important to note that special rehabilitation is 
reimbursed at the highest rate under the prospective payment system. 
Table 6

Clinical Conditions that Have Become Easier  to Place in the Past Year

Clinical Condition*  Percent of Discharge 
Planners 
Orthopedics  54.7 
Stroke/CVA  34.5 
Physical Therapy  16.2 
Rehabilitation Therapy (general)  13.9 
Occupational Therapy  3.0 
Speech Therapy  2.0 
* Categories are not mutually exclusive  Source: OEI Discharge Planning Survey, June 1999 
Evidence that Medicare patients are staying in hospitals longer is mixed. 
About half of discharge planners believe that the number of Medicare patients who have extended 
lengths of stay has increased in the past year.  One-third report that this increase is due to the new 
prospective payment system.  They explain that nursing homes are focusing on the cost of medical 
supplies and services and that they are being more selective about which types of patients they 
accept.  Others attribute the increase in extended stays to fewer beds being available in their area 
or to a general increase in the number of patients who need skilled care. 
Discharge planners explain that patients who are difficult to place generally remain in the hospital 
until they can be placed in a nursing home.  Some discharge planners attempt to place these 
patients farther away or in alternate forms of care such as home health.  In some cases, patients 
who are the most difficult to place stay in hospitals until they are able to go home. 
Medicare data, however, do not show any substantial increases in the average lengths of stay for 
the ten most common diagnoses discharged to SNFs.  As shown in Table 7, the average lengths of 
stay of these diagnoses are similar for the first five months of 1998 and the first five months of 
1999.  Note that the average lengths of stay also do not increase for any of the three diagnoses 
that are affected by the transfer policy, which we would expect to increase the average length of 
stay. 
Early Effects of PPS on Access to SNFs  15  OEI-02-99-00400  Table 7

Average Length of Stay by Diagnosis Related Groups,

First Five Months of 1998 and 1999

January to May  January to May 
1998  1999 
Average Length  Average Length  Difference 
DRG  Description  of Stay  of Stay  1998-1999 
014  Specific cerebrovascular disorders 1  9.6  8.2  -1.4 
079  Respiratory infections and inflammation  9.3  9.1  -0.2 
088  Chronic obstructive pulmonary disease  6.7  6.8  0.1 
089  Simple pneumonia and pleurisy  7.2  7.3  0.1 
127  Heart failure and shock  7.8  7.7  -0.1 
209  Major joint limb reattachment 1  5.4  5.3  -0.1 
210  Hip and femur procedures 1  6.8  6.7  -0.1 
296  Nutritional/misc. metabolic disorders  7.3  7.1  -0.2 
320  Kidney and urinary tract infections  5.9  6.6  0.7 
416  Septicemia  9.8  8.6  -1.2 
1 Included in the transfer policy  Source: Medicare National Claims History File 
Differences were not statistically significant at the .05 level 
Early Effects of PPS on Access to SNFs  16  OEI-02-99-00400  C O N C L U S I O N  
It appears that in an early response to the prospective payment system, some nursing homes have 
modified their admission practices.  However, despite this practice change, there is no direct 
evidence that Medicare patients are not receiving the SNF care they require.  This is partly due to 
an overall increase in the number of Medicare beds and to the fact that Medicare continues to 
reimburse at a higher rate than Medicaid, which is the primary payer of nursing home care. 
We stress that this is an early assessment of the effects of the prospective payment system on 
access.  We believe that the Department must remain vigilant to potential problems for Medicare 
patients and for nursing homes.  As part of this effort, we will periodically replicate this study of 
discharge planners and analysis of Medicare data.  We will particularly focus on the types of 
patients who were identified as being more difficult to place.  Additionally, we suggest that the 
Administration on Aging (AoA) alert long-term care ombudsmen to potential admissions 
problems in their areas.  The AoA also needs to monitor related National Ombudsmen Reporting 
System data for patterns of abuse. 
COMMENTS 
We received comments on the draft report from the Health Care Financing Administration.  They 
generally agree with our findings and our conclusion and note that our report is consistent with 
the early findings of their ongoing monitoring efforts.  A copy of their comments is provided in 
Appendix B. 
Early Effects of PPS on Access to SNFs  17  OEI-02-99-00400  APPENDIX A 
CONFIDENCE INTERVALS FOR KEY FINDINGS

We calculated confidence intervals for 7 key findings.  The point estimate and 95% confidence 
interval are given for each of the following: 
POINT  CONFIDENCE 
KEY FINDINGS  ESTIMATE  INTERVAL 
It is not difficult to place Medicare patients in nursing  65%  61 - 69% 
homes. 
It has become more difficult to place Medicare patients  19%  6 - 32% 
in the past year because of the new prospective payment 
system. 
Nursing homes have changed their admissions practices as  53%  47 - 59% 
a result of the new prospective payment system. 
The new system has had an effect on discharge planners  65%  60 - 70% 
ability to place Medicare patients in nursing homes. 
Patients requiring extensive services have become more  58%  54 - 62% 
difficult to place in nursing homes in the past year. 
The number of Medicare patients who have extended  32%  20 - 44% 
hospital stays has increased in the past year because of the 
new prospective payment system. 
Medicare patients who need special rehabilitation have  69%  59 - 79% 
become easier to place in nursing homes in the past year. 
Early Effects of PPS on Access to SNFs  18  OEI-02-99-00400  APPENDIX B 
Comments 
Early Effects of PPS on Access to SNFs  19  OEI-02-99-00400  Early Effects of PPS on Access to SNFs  20  OEI-02-99-00400  Early Effects of PPS on Access to SNFs  21  OEI-02-99-00400