Prospective payment and the provision of post-acute care: how the provisions of the Balanced Budget Act of 1997 altered utilization patterns for Medicare providers.

The Balanced Budget Act of 1997 mandated implementation of the prospective payment system for determining Medicare payments to skilled nursing facilities (SNFs) and home health agencies (HHAs). This study assessed the preliminary impact of the changes in reimbursement policy on hospitals, nursing homes, and home health agencies in the United States and the mid-Atlantic region, and conducted micro-level analyses of providers in one state, Delaware. An interrupted time series analysis used aggregate and provider-specific data from the Center for Medicare & Medicaid Services. Nationally, providers experienced significant changes in the number of patients, frequency of service, and payment amounts during the years immediately following implementation of PPS. HHAs reduced the number of visits per patient. In Delaware, hospital-owned nursing homes reduced their Medicare utilization, and proprietary facilities increased their utilization. One-third of the HHAs in Delaware withdrew from Medicare participation. Additional micro-level analyses are needed to substantiate the findings of the Delaware case study and to determine why providers adjusted their utilization of services to Medicare beneficiaries.