Productivity growth of skilled nursing facilities in the treatment of post-acute-care-intensive conditions

by Jing Gu, Neeraj Sood, Abe Dunn, John Romley

Health care is believed to be suffered from a “cost disease,” in which a heavy reliance on labor limits opportunities for efficiencies stemming from technological improvement. Although recent evidence shows that U.S. hospitals have experienced a positive trend of productivity growth, skilled nursing facilities are relatively “low-tech” compared to hospitals, leading some to worry that productivity at skilled nursing facilities will lag behind the rest of the economy.

To assess productivity growth among skilled nursing facilities (SNFs) in the treatment of conditions which frequently involve substantial post-acute care after hospital discharge.

We constructed an analytic file with the records of Medicare beneficiaries that were discharged from acute-care hospitals to SNFs with stroke, hip fracture, or lower extremity joint replacement (LEJR) between 2006 and 2014. We populated each record for 90 days starting at the time of SNF admission, detailing for each day the treatment site and all associated costs. We used ordinary least square regression to estimate growth in SNF productivity, measured by the ratio of “high-quality SNF stays” to total treatment costs. The primary definition of a high-quality stay was a stay that ended with the return of the patient to the community within 90 days after SNF admission. We controlled for patient demographics and comorbidities in the regression analyses.

Our sample included 1,076,066 patient stays at 14,394 SNFs with LEJR, 315,546 patient stays at 14,154 SNFs with stroke, and 739,608 patient stays at 14,588 SNFs with hip fracture. SNFs improved their productivity in the treatment of patients with LEJR, stroke, and hip fracture by 1.1%, 2.2%, and 2.0% per year, respectively. That pattern was robust to a number of alternative specifications. Regressions on year dummies showed that the productivity first decreased and then increased, with a lowest point in 2011. Over the study period, quality continued to rise, but dominated by higher costs at first. Costs then started to decrease, driving productivity to grow.

There has been substantial productivity growth in recent years among SNFs in the U.S. in the treatment of post-acute-care-intensive conditions.