Medicare, swing beds, and critical access hospitals

Critical Access Hospitals (CAHs) receive cost-based reimbursement from Medicare for inpatient care, including post-acute skilled care provided in swing beds (skilled swing days). Because the reimbursement formula treats swing bed and acute days equally, there is concern that CAH skilled swing days are "overreimbursed" as compared with skilled days provided in other settings. The reimbursement formula is complex; thus, empirical estimates are needed to identify the marginal cost per day to the hospital and the implied Medicare expenditure per day, accounting for fixed cost transfers between services. Using Medicare cost report data, we find that Medicare paid, on average, $581 for the routine portion of a CAH skilled swing day in 2009--more than the estimated marginal cost of $262, but less than the 2009 average per diem of $1,302. Estimates varied widely across the 1,300 CAHs; therefore, payment policy changes would likely have a broad range of effects.