Nursing Homes as Insurers? The Effect of Provider-Led Institutional Special Needs Plans

To estimate the effect of starting a provider-led Institutional Special Needs Plan (I-SNP) arrangement on facility-level enrollment, utilization, and quality.

I-SNPs are a type of Medicare Advantage (MA) plan that allows insurers to differentiate their benefits exclusively for long-term residents in nursing homes. Since I-SNPs first became available in 2006, there has been growth in provider-led I-SNPs where nursing homes are financially integrated or partnered with an insurer to operate a plan for their own residents. We used a difference-in-differences design to estimate the effect of starting a provider-led I-SNP arrangement on several facility-level outcomes, including the share of a facility's long-stay residents who were enrolled in an I-SNP, hospitalizations, medication use, pressure ulcers, physical restraints, falls, and mortality.

We used Medicare claims and nursing home resident assessments (2004-2021) to identify Medicare long-stay nursing home residents.

The start of a provider-led I-SNP arrangement led to a 17.0 percentage point (pp) increase (standard error [SE]: 0.006) in I-SNP enrollment among facility residents within 4 years relative to control nursing homes. We also estimate that the start of a provider-led I-SNP arrangement significantly decreased hospitalizations (-1.0 pp, SE: 0.002), increased the use of antipsychotic (0.4 pp, SE: 0.002) and hypnotic drugs (0.3 pp, SE: 0.001), and reporting of pressure ulcers (0.4 pp, SE: 0.002).

Provider-led I-SNPs allow nursing homes to bear financial risk for their residents. These results suggest that this form of risk bearing may successfully reduce utilization (e.g., hospitalizations), but with unclear implications for quality as increased use of sedating drugs and rates of pressure ulcers could either reflect poorer care or retention of sicker patients due to lower hospitalization rates.