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Market entry and exit in long-term care: 1985-2000.

Kathleen Dalton1, Hilda A Howard

  • 1University of North Carolina at Chapel Hill, USA. kathleen_dalton@unc.edu

Health Care Financing Review
|April 15, 2003
PubMed
Summary
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Skilled nursing facility (SNF) supply adjustments to Medicare prospective payment were immediate and varied by area. Post-payment system reductions occurred mainly in hospital-based facilities, linked to pre-existing supply, not demographics.

Area of Science:

  • Health Services Research
  • Healthcare Economics
  • Gerontology

Background:

  • The implementation of Medicare prospective payment systems (PPS) significantly impacted healthcare provider markets.
  • Understanding market dynamics, including entry and exit of skilled nursing facilities (SNFs), is crucial for policy evaluation.

Purpose of the Study:

  • To analyze the market entry and exit of skilled nursing providers in response to Medicare prospective payment.
  • To investigate factors influencing the reduction in the number of SNFs post-PPS implementation.

Main Methods:

  • Analysis of market entry and exit of skilled nursing providers.
  • County-level modeling controlling for state policy effects.
  • Examination of supply adjustments in urban versus rural areas.

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Main Results:

  • Immediate supply adjustments by SNFs were observed, with stronger responses in urban areas.
  • Widespread market expansion ceased in 1998, with net reductions primarily in hospital-based facilities.
  • Post-PPS SNF reductions were associated with higher pre-existing bed-to-population ratios and recent capacity expansion, not sociodemographic factors.

Conclusions:

  • SNF market adjustments to PPS were supply-driven, particularly in areas with high pre-existing capacity.
  • Reductions in SNF numbers were concentrated in the hospital-based sector and not linked to socioeconomic risk factors.