Working Paper: NBER ID: w25017
Authors: Ginger Zhe Jin; Ajin Lee; Susan Feng Lu
Abstract: Medicare does not pay for a skilled nursing facility (SNF) unless a fee-for-service patient has stayed in the hospital for at least three days. Discharges after the three-day cutoff consistently result in more transfers to SNFs. Using the three-day rule as an instrument, we find that SNF discharges decrease hospital readmission for patients with comorbidities. However, for knee and hip replacement patients, we find significant increases in readmission. This perverse effect is more severe when local SNFs have lower quality. Back-of-the-envelope calculations suggest that the three-day rule may have generated extra Medicare payments to SNFs by $100-447 million per year.
Keywords: Medicare; Skilled Nursing Facilities; Three-Day Rule; Hospital Readmission; Healthcare Spending
JEL Codes: D8; H51; I13; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Medicare three-day rule (I18) | SNF discharges (Y40) |
| SNF discharges (Y40) | hospital readmission rates (I11) |
| Medicare three-day rule (I18) | hospital readmission rates (I11) |
| SNF discharges (Y40) | hospital readmission rates (for KHR patients) (I11) |
| Medicare three-day rule (I18) | Medicare expenditure (H51) |
| SNF quality (occupancy rates and deficiency counts) (I24) | hospital readmission rates (I11) |