Address correspondence to Jacqueline S. Zinn, Ph.D., Temple University, 413 Ritter Annex, Philadelphia, PA 19122. Vincent Mor, Ph.D., is with Brown University, Community Medicine, Providence, RI. Orna Intrator, Ph.D., Zhanlian Feng, Ph.D., and Joseph Angelelli, Ph.D., are with Brown University, Gerontology and Health Services Research, Providence, RI. Jullet A. Davis, Ph.D., is with the University of Alabama, Department of Management and Marketing, Tuscaloosa, AL 35487-0225.
The Impact of the Prospective Payment System for Skilled Nursing Facilities on Therapy Service Provision: A Transaction Cost Approach
Article first published online: 18 DEC 2003
Health Services Research
Volume 38, Issue 6p1, pages 1467–1486, December 2003
How to Cite
Zinn, J. S., Mor, V., Intrator, O., Feng, Z., Angelelli, J. and Davis, J. A. (2003), The Impact of the Prospective Payment System for Skilled Nursing Facilities on Therapy Service Provision: A Transaction Cost Approach. Health Services Research, 38: 1467–1486. doi: 10.1111/j.1475-6773.2003.00188.x
This research was supported in part by a National Institute for Aging grant, no. AG#11624, and a Robert Wood Johnson Foundation Health Policy Investigator Award.
- Issue published online: 18 DEC 2003
- Article first published online: 18 DEC 2003
- Transaction costs;
- skilled nursing facilities;
- rehabilitation services;
- prospective payment
Objective. To examine skilled nursing facilities (SNFs) “make-or-buy” decisions with respect to rehabilitation therapy service provision in the 1990s, both before and after implementation of Medicare's Prospective Payment System (PPS) for SNFs.
Data Sources. Longitudinal On-line Survey Certification and Reporting (OSCAR) data (1992–2001) on a sample of 10,241 freestanding urban SNFs.
Study Design. We estimated a longitudinal multinomial logistic regression model derived from transaction cost economic theory to predict the probability of the outcome in each of four service provision categories (all employed staff, all contract, mixed, and no services provided).
Principal Findings. Transaction frequency, uncertainty, and complexity result in greater control over therapy services through employment as opposed to outside contracting. For-profit status and chain affiliation were associated with greater control over therapy services. Following PPS, nursing homes acted to limit transaction costs by either exiting the rehabilitation market or exerting greater control over therapy services by managing rehabilitation services in-house.
Conclusions. The financial incentives associated with changes in reimbursement methodology have implications that extend beyond the boundaries of the health care industry segment directly affected. Unintended quality and access consequences need to be carefully monitored by the Medicare program.