Hospital-based skilled nursing facility survival: Organizational and market-level predictors

Abstract

Background: Rising health care costs and consequent increases in Medicare reimbursements have led to many payment reforms over the years. Implementation of the prospective payment system (PPS) for hospitals in 1983 incentivized hospitals to either purchase skilled nursing facilities (SNFs) or utilize their excess capacity to establish one within the hospital. With PPS reimbursement being applied to SNFs in 1998, prior monetary incentives for hospitals to own an SNF disappeared. However, despite the reduction in numbers, many hospitals continued to operate their hospital-based skilled nursing facilities (HBSNFs).

Purpose: This study examines the organizational and market-level factors associated with the survival of HBSNFs using the population ecology of organizations framework.

Methodology: Using American Hospital Association survey data, event histories of all U.S. acute care hospitals with an open HBSNF in 1998 were plotted to examine if a hospital closed its HBSNF during a 22-year period (1998-2020). The primary independent variables included hospital size, ownership, total margin, market competition, and Medicare Advantage penetration. The independent and control variables were lagged by 1 year. Cox regressions were conducted to estimate the hazard ratios capturing the risk of HBSNF closure.

Results: The results showed that HBSNFs located in large, not-for-profit hospitals and those operating in less competitive markets had greater odds of surviving.

Practice implications: The HBSNF administrators of small, for-profit hospitals and those operating in highly competitive markets could utilize the findings of this study to judiciously allocate slack resources to their HBSNFs to keep those open given the current emphasis on continuity of care by regulatory bodies.