July 2007

The Impact of Medicare's Payment Rates on the Volume of Services Provided by Skilled Nursing Facilities

Increases in Medicare reimbursements tended to increase the volume of services at skilled nursing facilities (SNF). Changes in SNF service volume, defined as the number of Medicare-covered days beneficiaries spent in SNFs, varied by the type of facility. Hospital-based SNFs experienced greater service volume changes than free standing SNFs. A one-percent change in Medicare's payment rate for SNFs is estimated to result in a 0.13% increase in volume of services.

Congressional Budget Office researchers sought to measure changes in payment rates and SNF service volume using different units of analysis over different period of times. The analysis focused on services provided to Medicare beneficiaries who were enrolled in the traditional fee-for-service program. The researchers considered service volume changes in rural and urban geographic regions by evaluating volume and payment rates at 3,436 different hospital service areas between 1997 and 2001. They also considered service volume changes by provider type hospital-based, freestanding, non-profit, or for-profit between 1999 and 2003.