How Medicare Payment Standardization Affects the Perceived "Cost" of Post-Acute Care Provided in Critical Access Hospital Swing Beds

Lead researcher:
Project funded:
September 2019
Project completed:
March 2021

Per capita Medicare spending is a common performance measure used in value-based purchasing programs. To facilitate comparisons of Medicare spending within or across settings and geographic areas, Medicare-allowed charges are adjusted for geographic cost differences and payments that support larger Medicare program goals.

Currently, the payment standardization methodology used to adjust Critical Access Hospital (CAH) swing bed allowed charges differs from the payment standardization methodology used to adjust allowed charges in skilled nursing facilities (SNFs) paid under the SNF prospective payment system (PPS). Because CAH swing beds are reimbursed at the inpatient per diem rate and the swing bed payment standardization methodology relies on the area wage index, standardized allowed amounts are likely much higher for CAH swing beds than for SNFs. This disparity in perceived "cost" may create a disincentive for inpatient prospective payment system hospitals to discharge patients to CAH swing beds.

For example, since a discharging hospital's Medicare Spending Per Beneficiary (MSPB) measure includes standardized charges for any care received by a beneficiary in the 30 days following a hospital discharge, a discharge to a swing bed could have a disproportionately negative impact on MSPB as compared to a discharge to a SNF. However, the impact of payment standardization on the standardized cost of post-acute care in CAH swing beds is currently unknown. This study identified the effects of the payment standardization method on the perceived "cost" of post-acute care provided in CAH swing beds.

Using Medicare claims data for 2016 CAH swing bed stays combined with representative low-, medium-, and high-cost resource utilization groups, we calculated the standardized allowed amount for swing bed claims using swing bed payment standardization methodology and SNF PPS payment standardization methodology and compared these amounts to the actual Medicare allowed amount from the claim.

Payment standardization could influence post-acute care discharge patterns, and therefore, access to post-acute care for rural residents. Policymakers need to understand where payment formulas may inadvertently penalize rural providers through lack of comparable standardized payments between SNF and swing bed post-acute care settings.