Why are hospital-based nursing homes so costly?
OBJECTIVES: To determine the extent to which higher costs in hospital-based skilled nursing facilities (HBSNF) can be explained by observable resident characteristics and unobservable selection effects, implying a design shortcoming of the skilled nursing facility prospective payment system (SNF PPS) implemented for Medicare-covered stays by the Balanced Budget Act of 1997 (BBA 1997). RESEARCH DESIGN: Data on resident characteristics from the Minimum Data Set (MDS) are combined with staff time costs from the Centers for Medicare and Medicaid Services’ (CMS, formerly HCFA) 1995 and 1997 SNF Staff Time Measurement (STM) studies and nontherapy ancillary claim costs extracted from CMS SNF claim records. An endogenous switching model was estimated to measure the effect on costs of the relatively high acuity of HBSNF residents, net of differences purely attributable to the treatment setting. RESULTS: It was found that virtually the entire HBSNF differential is attributable to setting effects
