George Grob

Deputy Inspector General

for Evaluation and Inspections

Effects of the Prospective Payment System on Access to Skilled Nursing Facilities for Patients

with End-Stage Renal Disease (OEI-02-99-00402)

Kathleen Buto

Deputy Director, Center for Health Plans 

and Providers, HCFA 

In response to requests from your staff, the Office of Inspector General (OIG) has conducted 

an analysis of the potential effects of the prospective payment system on access to skilled 

nursing facilities for patients with end-stage renal disease (ESRD). This analysis supplements 

an earlier report entitled, Early Effects of the Prospective Payment System on Access to Skilled 

Nursing Facilities, OEI-02-99-00400, where one of the findings included dialysis patients as 

among those more difficult to place. 

Background 

The Health Care Financing Administration asked OIG to assess whether the new prospective 

payment system for skilled nursing facilities (SNFs) is causing access problems for Medicare 

beneficiaries. To answer this question, 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. We also examined Medicare data 

related to SNF discharges and hospital length of stay. 

Our analysis showed that so far, there are no serious problems in placing Medicare patients in 

nursing homes. Generally, discharge planners report that they can place Medicare patients in 

nursing homes. Medicare data also confirm that there are no changes in nursing home 

placements for Medicare patients. However, discharge planners also report that nursing homes 

are changing their admissions practices in response to the prospective payment system. 

Specifically, they note that patients who need extensive services have become more difficult to 

place, including ESRD patients who have high transportation costs because of their need for 

dialysis. We also found that patients who need rehabilitation services have become easier to 

place. 

After reviewing these findings, your staff asked us to look at any early effects of the 

prospective payment system on access to SNFs for ESRD patients. In response, we selected a 

20 percent sample of all Medicare beneficiaries from the Medicare National Claims History File 

and reviewed data for patients who had a discharge diagnosis for renal failure (DRG 316) or 
for renal dialysis (DRG 317), or who had been in the hospital for other reasons and had endstage renal disease. These patients are referred to as ESRD patients for the purposes of this 

analysis. We analyzed discharge patterns and hospital length of stay data for ESRD patients for 

the first 5 months in 1998 and the same 5 months in 1999. Our sample included 3,384 ESRD 

patients who were discharged to SNFs during this time period in 1998 and 3,981 ESRD 

patients who were discharged to SNFs in 1999. 

FINDINGS 

Changes in discharge patterns to SNFs and length of hospital stays for endstage renal disease patients are small. 

Medicare data show small changes in the overall proportion of discharges to SNFs for ESRD 

patients. This proportion increased slightly from 11.2 percent in the first 5 months in 1998, 

which is prior to the implementation of the prospective payment system, to 11.9 percent in the 

same 5 months in 1999, which is after the implementation of the new system. (See Table 1.) 

Table 1

Distribution of Medicare End-Stage Renal Disease (ESRD) 

Patient Discharges to Post Hospital Services,

First 5 Months of 1998 and 1999

January to May January to May 

1998 1999 

Post Hospital 

Service 

Percent of Percent of Difference 

ESRD Discharges ESRD Discharges 1998-1999 

Home 63.8 60.6 -3.2 ** 

SNF 11.2 11.9 0.7 ** 

Home Health 8.6 9.1 0.5 * 

Intermediate Care 1.7 2.1 0.3 ** 

Other 14.8 16.4 1.7 ** 

Source: Medicare National Claims History File 

Note: Includes End-Stage Renal Disease patients and patients with DRGs 316 or 317. 

Differences may be due to rounding. 

* Statistically significant at the .05 level. 

** Statistically significant at the .01 level. 

The data also show no significant changes in the types of ESRD patients discharged to SNFs. 

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The largest difference is among patients with renal failure (DRG 316) and that difference 

reflects an increase in placements to SNFs. As shown in Table 2, a greater proportion of 

ESRD patients with renal failure went to SNFs in the first 5 months of 1999 compared to the 

same time period in 1998. Medicare data show small changes in discharges to SNFs for 

ESRD patients with other diagnoses. None of the estimates are statistically significant, 

however. 

Table 2

Distribution of Medicare ESRD Discharges to Nursing Homes

by Diagnosis Related Groups,

First 5 Months of 1998 and 1999

January to May January to May Difference 

DRG Description 1998 1999 1998-1999 

Percent of Percent of 

ESRD Discharges ESRD Discharges 

316 Renal failure 38.7 40.9 2.2 

113 Amputation for circulatory system 

disorders 4.1 3.6 -0.5 

478 Other vascular procedures with 

complication or comorbid condition 3.8 4.1 0.2 

127 Heart failure and shock 3.1 2.9 -0.2 

416 Septicemia 2.9 2.4 -0.5 

144 Other circulatory system diagnoses with 

complication or comorbid condition 2.8 3.4 0.6 

120 Other circulatory system operating room 

procedures 2.4 2.9 0.5 

089 Simple pneumonia and pleurisy 2.1 2.5 0.5 

014 Specific cerebrovascular disorders 1.8 1.5 -0.3 

415 Operating room procedure for infectious 

and parasitic diseases 1.7 1.2 -0.5 

468 Extensive operating room procedure 

unrelated to principal diagnosis 1.3 1.6 0.3 

Note: Differences may be due to rounding. Source: Medicare National Claims History File 

Differences were not statistically significant at the .05 level. 

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Overall, the average hospital length of stay for ESRD patients discharged to SNFs was 10.2 

days in the first 5 months of 1998 compared to 10.4 days in the same period in 1999. This 

difference is not statistically significant. Average length of stay did change for a few DRGs. 

As shown in Table 3, the average length of stay increased in two of the most common DRGs 

and decreased in one of the most common DRGs for the ESRD population. 

Table 3

Average Length of Stay of ESRD Patients Discharged to SNFs

by Diagnosis Related Groups,

First 5 Months of 1998 and 1999

January to May January to May 

1998 1999 

DRG Description Stay in Days Stay in Days 1998-1999 

Average Length of Average Length of Difference 

316 Renal failure 8.9 9.1 0.2 

113 Amputation for circulatory system 

disorders 14.0 13.4 -0.6 

478 Other vascular procedures with 

complication or comorbid condition 8.9 11.4 2.5 * 

127 Heart failure and shock 7.6 6.1 -1.5 

416 Septicemia 10.2 12.5 2.3 

144 Other circulatory system diagnoses with 

complication or comorbid condition 7.0 8.3 1.3 

120 Other circulatory system operating room 

procedures 8.1 11.3 3.2 * 

089 Simple pneumonia and pleurisy 8.7 7.7 -1.0 

014 Specific cerebrovascular disorders 11.3 9.4 -1.9 

415 Operating room procedure for infectious 

and parasitic diseases 21.3 16.4 -4.9 * 

468 Extensive operating room procedure 15.1 20.5 5.4 

unrelated to principal diagnosis 

*Statistically significant at the .05 level. Source: Medicare National Claims History File 

We hope this information will be helpful to HCFA staff as they continue to monitor the effects 

of the prospective payment system. If you have any questions or comments about this 

memorandum, please call me or have your staff call Stuart Wright at (410) 786-3144. 

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