Association of Skilled Nursing Facility Ownership by Health Care Networks With Utilization and Spending

IMPORTANCE: Health care mergers and acquisitions have increased vertical integration of skilled nursing facilities (SNFs) in health care networks. While vertical integration may result in improved care coordination and quality, it may also lead to excess utilization, as SNFs are paid a per diem rate. OBJECTIVE: To determine the association of vertical integration of SNFs within hospital networks with SNF utilization, readmissions, and spending for Medicare beneficiaries undergoing elective hip replacement. DESIGN, SETTING, AND PARTICIPANTS: This cross-sectional study evaluated 100% Medicare administrative claims for nonfederal acute care hospitals performing at least 10 elective hip replacements during the study period. Fee-for-service Medicare beneficiaries aged 66 to 99 years who underwent elective hip replacement between January 1, 2016, and December 31, 2017, with continuous Medicare coverage for 3 months before and 6 months after surgery were included. Data were analyzed from February 2 to August 8, 2022. EXPOSURES: Treatment at a hospital within a network that also owns at least 1 SNF based on the 2017 American Hospital Association survey. MAIN OUTCOMES AND MEASURES: Rates of SNF utilization, 30-day readmissions, and price-standardized 30-day episode payments. Hierarchical multivariable logistic and linear regression clustered at hospitals was performed with adjusting for patient, hospital, and network characteristics. RESULTS: A total of 150 788 patients (61.4% women; mean [SD] age, 74.3 [6.4] years) underwent hip replacement. After risk adjustment, vertical SNF integration was associated with a higher rate of SNF utilization (21.7% [95% CI, 20.4%-23.0%] vs 19.7% [95% CI, 18.7%-20.7%]; adjusted odds ratio [aOR], 1.15 [95% CI, 1.03-1.29]; P = .01) and lower 30-day readmission rate (5.6% [95% CI, 5.4%-5.8%] vs 5.9% [95% CI, 5.7%-6.1%]; aOR, 0.94 [95% CI, 0.89-0.99]; P = .03). Despite higher SNF utilization, the total adjusted 30-day episode payments were slightly lower ($20 230 [95% CI, $20 035-$20 425] vs $20 487 [95% CI, $20 314-$20 660]; difference, −$275 [95% CI, −$15 to −$498]; P = .04) driven by lower postacute payments and shorter SNF length of stays. Adjusted readmission rates were particularly low for patients not sent to an SNF (3.6% [95% CI, 3.4%-3.7%]; P < .001) but were significantly higher for patients with an SNF length of stay less than 5 days (41.3% [95% CI, 39.2%-43.3%]; P < .001). CONCLUSIONS AND RELEVANCE: In this cross-sectional study of Medicare beneficiaries undergoing elective hip replacements, vertical integration of SNFs in a hospital network was associated with higher rates of SNF utilization and lower rates of readmissions without evidence of higher overall episode payments. These findings support the purported value of integrating SNFs into hospital networks but also suggest that there is room for improving the postoperative care of patients in SNFs early in their stay.