Abstract

Background and objectieves: Medicare Advantage (MA) contracts receive capitated payment which incentivizes care management and efficiency in the care delivery process. The Medicare Modernization Act of 2004 allowed MA contracts to form preferred provider networks and to concentrate their patients among those preferred providers to take advantage of economies of scale. However, the effect of such concentration on patients’ welfare is not clear. Prior research has found that MA contracts pay providers at a much lower rates than traditional Medicare and selectively guide patients to lower quality providers. In this study, we focus on the skilled nursing facility (SNF) industry to assess the patient health implications if the treating SNF has a higher share of patients enrolled in the same MA contract.

Methods: We use the Minimum Dataset (MDS) to assess all MA patients admitted to a SNF without a prior SNF stay in the past year, from 2012-2014. We link MDS patients to the Medicare enrollment file to identify their MA enrollment, to the Medicare Healthcare Effectiveness Data and Information Set (HEDIS) data to identify patients’ enrolled MA contract and to the On-line Survey & Certification Automated Record (OSCAR) to gather SNF characteristics. Our primary outcomes are 180-day survival post SNF admission, 30-day hospital readmissions, 30-day discharge to home, and SNF length of stay. Our primary explanatory variable is the concentration of a patient’s MA contract in the SNF they are admitted to.

The share of a SNF’s patients enrolled in an MA contract is endogenous because it may be driven by MA contract selection effects, and may reflect unmeasured components of patient health and SNF quality. To address this, we leveraged the variation in different MA contract’s penetration in patients’ residential ZIP codes and SNFs’ ZIP codes. We used a SNF choice model to calculate the share of admissions in a SNF from a specific MA contract that are due to the variation in MA contracts’ penetration across ZIP codes. We used this as the IV and fit linear probability models adjusting for patient characteristics, SNF characteristics, and MA contract fixed effects.

Results: The naïve regressions show that that increase in a patient’s MA contract concentration in a SNF decreases the probability of being discharged within 30 days, and increases SNF length of stay and likelihood of survival. However, IV regressions suggest that there is no statistically significant of this concentration on patient’s outcome. These results suggest that concentration of patients from an MA contract may not improve patient’s health outcome and all MA patients in a SNF are treated in the same way.