The Effect of Medicare Payment Standardization Methods on the Perceived Cost of Post-Acute Swing Bed Care in Critical Access Hospitals


The Centers for Medicare and Medicaid (CMS) use standardized payments to compare Medicare resource use across locations and settings. Currently, CMS uses different payment systems to reimburse post-acute care provided in Critical Access Hospital (CAH) swing beds versus inpatient prospective payment system (IPPS) hospital swing beds or skilled nursing facilities (SNFs). This results in differential payments for theoretically similar care. Current CMS payment standardization methods perpetuate these differences across settings. Importantly, CMS faced data limitations in developing a payment standardization method for CAH swing bed care since CAH swing bed claims do not include the patient assessment information (e.g., measures of patient characteristics and service use) that is included with SNF claims and used to adjust SNF claims for case mix.

Thus, differences in the payment standardization methods used for CAHs, IPPS hospital swing beds, and SNFs may influence post-acute care discharge patterns and, subsequently, access to post-acute care for rural residents. The purpose of this study is to describe the effects of current Medicare payment standardization methods on the perceived cost of CAH swing bed care as it relates to the Medicare Spending per Beneficiary measure. Using 2016 Medicare CAH swing bed claims, this study compares Medicare allowed amounts, standardized allowed amounts using CMS's CAH swing bed payment standardization method, and simulated standardized allowed amounts using the SNF prospective payment system payment standardization method.

Using CMS's current CAH swing bed payment standardization method, standardized swing bed allowed amounts per day and per claim are generally higher than actual swing bed allowed amounts. Further, standardized swing bed allowed amounts are generally three to five times greater than what they would be if CMS's SNF payment standardization method were applied to swing bed payments. If CAH swing bed providers and SNFs provide similar services, this result appears counter to the stated purpose of payment standardization, which should remove the effects of payment differences across similar settings.

The results show that the difference in payment standardization methods between CAH swing beds and SNFs/IPPS hospital swing beds exacerbate this differential and might not reflect the true resource utilization required to provide swing bed care.

North Carolina Rural Health Research and Policy Analysis Center
Tyler Malone, Denise Kirk, Kristin Reiter