The impact of the prospective payment system for skilled nursing facilities on therapy service provision: a transaction cost approach.
OBJECTIVE
To examine skilled nursing facilities (SNFs) "make-or-buy" decisions with respect to rehabilitation therapy service provision in the 1990s, both before and after implementation of Medicare's Prospective Payment System (PPS) for SNFs.


METHODS
Longitudinal On-line Survey Certification and Reporting (OSCAR) data (1992-2001) on a sample of 10,241 freestanding urban SNFs.


METHODS
We estimated a longitudinal multinomial logistic regression model derived from transaction cost economic theory to predict the probability of the outcome in each of four service provision categories (all employed staff, all contract, mixed, and no services provided).


RESULTS
Transaction frequency, uncertainty, and complexity result in greater control over therapy services through employment as opposed to outside contracting. For-profit status and chain affiliation were associated with greater control over therapy services. Following PPS, nursing homes acted to limit transaction costs by either exiting the rehabilitation market or exerting greater control over therapy services by managing rehabilitation services in-house.


CONCLUSIONS
The financial incentives associated with changes in reimbursement methodology have implications that extend beyond the boundaries of the health care industry segment directly affected. Unintended quality and access consequences need to be carefully monitored by the Medicare program.
Zinn
Jacqueline S
JS
Temple University, Philadelphia, PA 19122, USA.
Mor
Vincent
V
Intrator
Orna
O
Feng
Zhanlian
Z
Angelelli
Joseph
J
Davis
Jullet A
JA
D003284:Contract Services; D017048:Health Care Costs; D006297:Health Services Accessibility; D006302:Health Services Research; D006801:Humans; D016015:Logistic Models; D008137:Longitudinal Studies; D006278:Medicare / Q000331:legislation & jurisprudence*; D011445:Prospective Payment System / Q000331:legislation & jurisprudence*; D012046:Rehabilitation / Q000191:economics*; D012866:Skilled Nursing Facilities / Q000191:economics* / Q000706:statistics & numerical data; D014481:United States; D019037:Urban Health Services