The feasibility of using case mix and prospective payment for Medicare skilled nursing facilities

Congress, at the time it asked for a feasibility study of the use of prospective payment for hospital care delivered to Medicare patients, also asked for a study of the Medicare skilled nursing facility (SNF) benefit. The information and commentary in this paper are based on the history and findings of the recent Health Care Financing Administration study of the SNF benefit. We discuss the technical, administrative, and policy issues that need to be addressed to implement a patient-level case-mix adjustment for reimbursing SNFs under Medicare. We conclude that conditions are currently not ideal for implementing a patient-level case-mix adjustment for Medicare SNFs. Future research may be able to remedy some of the impediments to adapting case-mix adjustments for SNFs.