Prospective payment for Medicare skilled nursing facilities: background and issues

Strong interest by Congress in a Medicare prospective payment system for skilled nursing facilities (SNF's) resulted in a major study by the Health Care Financing Administration on the Medicare SNF benefit. This article highlights findings from that study, which addressed the following: the Medicare SNF benefit, utilization and expenditures, the Medicare SNF industry, problems with the current Medicare SNF reimbursement system, efforts to develop a Medicare SNF case-mix measure, and case-mix differences between hospital-based and freestanding SNF's. In addition, we discuss the implications of the study findings for the design of a Medicare SNF prospective payment system (PPS).