SNF Vertical Integration Tied to Higher Utilization, Fewer Readmissions

Vertical integration of skilled nursing facilities (SNFs) in a hospital network was associated with increased SNF utilization, decreased readmission rates, and lower episode payments, according to a study published in JAMA Network Open.

Hospital merger and acquisition activity will likely continue rising, including vertical integrations. In 2015, 80 percent of hospitals owned at least one post-acute care service, with 33 percent owning an SNF. Vertical integration of SNFs may have mixed impacts on health outcomes, utilization, and costs.

Researchers used Medicare claims data from January 1, 2016, to December 31, 2017, to assess differences in outcomes and spending for beneficiaries who received elective hip replacements in hospitals in networks that had vertical integration of SNFs and hospitals in networks that did not.

Elective hip replacement is a common operation for Medicare beneficiaries with a lower need for skilled nursing. Spending variation for the procedure is typically due to the utilization of post-acute care rather than complications.

The study sample included 150,788 Medicare beneficiaries who received elective total hip replacements at 1,249 hospitals within 305 hospital networks.

After controlling for medical comorbidities, patient and hospital factors, hospital volume, and network size, SNF vertical integration was tied to increased SNF utilization. At hospitals within networks that had SNF vertical integration, 21.7 percent of Medicare beneficiaries were discharged to SNFs, compared to 19.7 percent at hospitals without SNF vertical integration.

These findings reinforced prior research that found that, according to the researchers.

A higher surgical volume was associated with lower SNF utilization rates, the study noted.

Hospitals in networks with SNF vertical integration saw lower 30-day readmission rates (5.6 percent) than those without integration (5.9 percent).

Despite seeing higher SNF utilization, 30-day episode payments were lower in hospital networks with SNF vertical integration ($20,230 versus $20,487). This difference was driven by lower post-acute payments and shorter SNF lengths of stay.

The increased utilization associated with SNF vertical integration reinforced prior research that revealed that hospital ownership of an SNF contributed 9 percent to the SNF utilization rate of 51 percent for patients undergoing emergency surgery.

In addition, the study findings could suggest overutilization due to the current trends to shift hip replacements to outpatient settings. Hospitals receive a fixed reimbursement per procedure regardless of the length of stay, which incentivizes hospitals to limit length of stay and discharge patients to post-acute care settings like SNFs.

“Vertical integration would allow hospital networks to increase throughput while still capturing the revenue from downstream phases of healthcare delivery,” researchers wrote. “This interpretation would be further supported by our findings that SNF lengths of stay in vertically integrated health care networks tend to be shorter.”

While the short length of stays helped result in lower episode payments, further research is necessary to

Meanwhile, lower readmission rates may suggest that hospital networks are leveraging vertical integration with post-acute healthcare services to improve care coordination.

As hospital consolidation continues, policymakers should consider alternative payment models at the hospital network level to align incentives with post-acute care. For example, a bundled payment program for joint replacements could encourage care coordination within the network, incentivize decreased utilization of unnecessary services, and control costs, researchers said.