The impact of the 1997 balanced budget amendment's prospective payment system on patient case mix and rehabilitation utilization in skilled nursing

Purpose: This study examines the impact of the post-acute prospective payment system (PPS) on Medicare-funded rehabilitation services in skilled nursing facilities (SNFs) and whether such impact varies under different payment mechanisms. Design and Methods: We interviewed 214 Medicare beneficiaries admitted to three SNFs in southern California for rehabilitation. We compared patients' admission characteristics and therapy utilization among those receiving post-acute rehabilitation before and after the implementation of PPS. Results: Patients admitted after PPS implementation were more likely to have orthopedic problems or stroke and poorer self-reported physical health. They had significantly shorter lengths of stay in rehabilitation and received significantly less therapy, although those in managed care had less reduction in treatment after SNF-PPS implementation than those in fee-for-service. Implications: After SNF-PPS implementation, rehabilitation treatment levels in the study sites were reduced. Whereas changes in Medicare managed care were comparatively modest, we observed significant changes in intensity and duration of physical and occupational therapies in Medicare fee-for-service.