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Medicare Payment to Skilled Nursing Facilities: The Consequences of the Three-Day Rule

Author

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  • Ginger Zhe Jin
  • Ajin Lee
  • Susan Feng Lu

Abstract

Medicare does not pay for a skilled nursing facility (SNF) unless a fee-for-service patient has stayed in the hospital for at least three days. Discharges after the three-day cutoff consistently result in more transfers to SNFs. Using the three-day rule as an instrument, we find that SNF discharges decrease hospital readmission for patients with comorbidities. However, for knee and hip replacement patients, we find significant increases in readmission. This perverse effect is more severe when local SNFs have lower quality. Back-of-the-envelope calculations suggest that the three-day rule may have generated extra Medicare payments to SNFs by $100-447 million per year.

Suggested Citation

  • Ginger Zhe Jin & Ajin Lee & Susan Feng Lu, 2018. "Medicare Payment to Skilled Nursing Facilities: The Consequences of the Three-Day Rule," NBER Working Papers 25017, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25017
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    Cited by:

    1. Martin B. Hackmann & R. Vincent Pohl & Nicolas R. Ziebarth, 2024. "Patient versus Provider Incentives in Long-Term Care," American Economic Journal: Applied Economics, American Economic Association, vol. 16(3), pages 178-218, July.
    2. Moura, Ana, 2021. "Essays in health economics," Other publications TiSEM c93abd22-fa4a-42a5-b172-d, Tilburg University, School of Economics and Management.
    3. Maggie Shi, 2023. "Monitoring for Waste: Evidence from Medicare Audits," NBER Working Papers 31559, National Bureau of Economic Research, Inc.
    4. Moura, Ana, 2022. "Do subsidized nursing homes and home care teams reduce hospital bed-blocking? Evidence from Portugal," Journal of Health Economics, Elsevier, vol. 84(C).
    5. Martin Benjamin Hackmann & R. Vincent Pohl, 2018. "Patient vs. Provider Incentives in Long-Term Care," CESifo Working Paper Series 7373, CESifo.

    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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