Impact of payment source on hospitalization risks among nursing home residents: Lessons from four states

Objectives: Nursing home (NH) originating hospitalizations are costly; many are considered unnecessary and may lead to further health deterioration. The aim of this study is to disentangle the within-facility disparities from the across-facility variations in hospitalization risks between Medicaid and private-pay residents; and to investigate the impact of financial incentives on NH hospitalization decisions.

Methods: Data include the Minimum Data Set (MDS), Medicare and Medicaid claims files, Medicaid cost reports, and OSCAR data from CA, NY, OH and TX in 2003. The sample includes 226,907 NH residents (Medicaid or private-pay). Individual is the unit of analysis. Hospitalization is the dependent variable. Individual payer status and facility payer-mix are the main variables of interests. The analyses are stratified by state and facility ownership; and responses to financial incentives are tested statistically to make inferences about hypotheses.

Results: Medicaid residents are more likely to be hospitalized than private-pay residents, both due to within-facility disparities and across-facility variations. The within-facility disparities are modified by facility characteristics (e.g. ownership) and state Medicaid policies (e.g. bed-hold policy). NHs with a higher concentration of Medicaid residents are more likely to hospitalize their residents. Higher state Medicaid rates do not necessarily reduce NHs' hospitalization rates.

Conclusion: NH's hospitalization decisions are affected by financial incentives (i.e individual payment source, facility ownership, state bed-hold policy), which lead to both within- and across-facility variations in hospitalization risks between Medicaid and private-pay residents. To reduce these unnecessary hospitalization events, efforts should be focused on reducing both within-facility disparities and across-facility differences.