Effect of Hospital–SNF Referral Linkages on Rehospitalization

Over the last three decades, Medicare payment policies created silos that exacerbated health care fragmentation and increased health care transitions, including rehospitalizations. A growing number of hospitalized patients are discharged to postacute care (PAC) settings while hospital length of stay continues to drop (MedPAC 2011). The Affordable Care Act (ACA) instituted numerous provisions designed to break down these payment silos and to make hospitals accountable for their patients' PAC experiences and costs, including unnecessary rehospitalizations. One consequence of these policies may be to incentivize hospitals to enhance collaboration with PAC providers. Using Medicare claims data from beneficiaries newly transferred to skilled nursing facilities (SNFs), we examine the effect of hospitals' concentrating their discharges to particular SNFs on the 30-day rehospitalization rate. The last decade has seen a marked growth in rehospitalization of SNF patients. Between 2000 and 2006, 30-day rehospitalization rates of Medicare beneficiaries newly discharged to SNF rose from 16 to 20 percent. For prior nursing home residents, this increased from 22 to 27 percent, at an estimated total cost to Medicare of $4.34 billion in 2006 (Mor et al. 2010). The average rehospitalization rate during a Medicare-covered nursing home stay in the United States in 2006 was over 23 percent, and it has been climbing for the last decade (Saliba et al. 2000; Intrator, Zinn, and Mor 2004; Mor et al. 2010; Ouslander et al. 2010). Rehospitalizations are a symptom of dysfunction in the continuity of care, but we know little about the interorganizational structures that facilitate or complicate transitions between care settings (Feng et al. 2011a). Although there have been several randomized trials of interventions to reduce rehospitalizations among Medicare beneficiaries discharged home, no similarly rigorous studies of programs designed to reduce rehospitalization from PAC providers have been undertaken (Naylor et al. 1999; Coleman et al. 2006; Jack et al. 2009). Policy changes under the ACA, particularly the rehospitalization penalty which went into effect in 2012, have altered the landscape to the point that hospitals must now consider the clinical capabilities of the settings to which they discharge their patients (Mor and Besdine 2011). However, while hospitals have successfully extended their domain to cover outpatient care and to create “systems” that include physician practice associations, unless a hospital owns an SNF, partnering with one is less common. Nonetheless, it stands to reason that more frequent exchanges between hospital and SNF clinical staff could improve the efficiency and effectiveness of communication. One would assume that frequent referrals reinforce mutual learning, making it possible for hospital–SNF pairs to experience the benefits of a positive volume–outcome relationship. With repetition, easier communication at the administrative and clinical levels is routinized and personal relations overlay and reinforce administrative arrangements. We do know that closures of hospital-based SNFs in the last decade contributed to rising rehospitalization rates, suggesting that stronger organizational ties may be beneficial (Rahman, Zinn, and Mor 2013). In this study, we seek to determine the effect of hospitals concentrating their SNF discharges to a small number of providers on the risk that their discharged Medicare patients will be rehospitalized. We seek to test the impact of this “preferred provider” relationship with an SNF by estimating the impact of referral volume and concentration on the rate of rehospitalization. Our approach is based on the premise that the distance preference of patients acts as an important determinant of transfers from hospital to alternative SNFs. This allows us to identify portions of such transfers that are not due to unobserved quality of care or interorganizational arrangements, making it possible to estimate the net effect of hospital concentration of Medicare discharges on rehospitalizations.