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Swing-bed services under the Medicare program, 1984-1987.

Swing-bed services under the Medicare program, 1984-87


This article traces the growth in the use of swing-bed services by Medicare beneficiaries from 1984 through 1987. In the context of the Medicare program, swing beds are beds that can be used by small rural hospitals to furnish both acute and post-acute care. To be covered under Medicare, the post-acute services must meet the same level of care requirements applied to the reimbursement of services by skilled nursing facilities (SNFs). States have the option of also covering swing-bed services at the intermediate care level under their Medicaid programs.

Thw swing-bed concept was incorporated into the Medicare program by the provisions of the Omnibus Reconciliation Act of 1980 (Public Law 96-499). The law authorized the Mediare and Medicaid programs to cover swing-bed services furnished by rural hospitals with fewer than 50 beds. the provisions of the law were based on the experiences gained in demonstration projects that began in rural hospitals in Utah during the early 1970s and later expanded to Iowa, South Dakota, and Texas. The approach proved popular and received public and private sector support. The program takes advantage of the declining acute care occupancy rates and the surplus bed capacity that became increasingly common among rural hospitals during the 1970s. It provided these hospitals a means of obtaining additional revenues without incurring significant additional costs. At the same time, it provided greater access to post-acute nursing care services in rural areas where such services tend to be thinly dispersed.

The regulations governing Medicare coverage of post-acute services furnished in swing-bed hospitals were issued by the Health Care Financing Administration in July 1982. The method of paying for skilled nursing care services furnished by a swing-bed hospital was based on the assumption that these hospitals incur a relatively low incremental cost to provide post-acute care. they use the personnel, euipment, and facilities already in place to serve acute care patients. Additional service requirements to meet the special needs of nursing care patients (e.g., patient activities, discharge planning) would not require a major expansion of staff. Accordingly, the per diem reimbursement rate for the routine care component of post-acute services covered under Medicare in a swing bed was set at a rate equal to the average paid by the Medicaid program to SNFs for skilled nursing care during the prior calendar year in the State where the hospital is located. Ancillary services were to be reimbursed at cost.

The period following the issuance of the swing-bed regulations was marked by intense Federal efforts to contain the rise of hospital costs to the Medicare program. Several measures affecting payments to hospitals were passed during this period. The Tax Equity and Fiscal Responsibility Act (TEFRA) was passed in September 1982; the Social Security Amendments of 1983 instituted the prospective payment system (PPS) for hospital reimbursement; and the Deficit Reduction Act (DEFRA) of 1984 reinstated a new version of the Medicare separate reimbursement limits for hospital-based and freestanding SNF care that had been eliminated under TEFRA.

This rapid pace of change in the bases by which Medicare reimbursed hospitals for acute and post-acute care induced uncertainty among rural hospitals as to whether it was worthwhile electing the swing-bed option. This was reflected in the initial slow rate of applications by eligible hospitals ofr certification as a swing-bed facility. However, as the incentives provided by PPS at the acute and post-acute interface became clearer, the rate of election increased. This is reflected in Table 1 that shows the rate at which hospitals became certified to furnish swing-bed services.

By the end of 1983, about 18 months following the issuance of the regulations, only 149 of an estimated 2,236 hospitals eligible to elect the swing-bed option had done so. By mid-1987, the proportion was approaching the halfway point.

The increasing participation of hospitals in the provision of post-acute skilled nursing care services resulted in swing beds gaining an increasing share of the Medicare SNF market. As summarized in Table 2 and detailed in Table 3, admissions to swing-bed hospitals for SNF services increased from 3.0 percent of all Medicare SNF admissions in 1984 to 9.7 percent in 1987. the swing-bed share of Medicare-covered SNF days increased from 1.5 to 6.0 percent dureing the same period. Reimbursements for swing-bed care increased from 2.0 percent of SNF reimbursements in 1984 to 6.2 percent in 1987.

Shaughnessy, Schlenker, and Silverman (1988) reported findings that help to interpret the data in Table 3. They found that swing-bed patients have substantially shorter stays and greater rehabilitation potential than do nursing home patients. Swing-bed patients, in greater proportion than nursing home patients, were found to need intense medical and skilled care for such problems as recovery from surgery, hip fractures within the past 6 weeks, shortness of breath, and the need for intravenous catheters. Nursing homes tend to treat patients with problems more typically seen in institutional long-term care settings; such as, incontinence, impaired cognitive functioning, and dependence in carrying out activities of daily living (e.g., feeding self, dressing). Each type of facility seems particularly suited to care for patients who can be, respectively, characterized as needing intense subacute care or as the traditional long-term care patient. The evaluation concluded, "At the subacute phase, the quality of services furnished by hospitals was found to be better overall than those services furnished by nursing homes. On the other hand, nursing homes provide higher-quality, traditional, long-term care services."

In addition to providing a partial explanation for the differences in length of stay, case-mix explains some of the differences in covered charges. The evaluation report estimates (based on 1985 data) that the more intense but shorter term care required by swing-bed patients results in costs about 20-percent higher per day than the average nursing home patient. This is reflected in the differences in the covered charges submitted. In 1987, swing-bed covered charges averaged $185 per day compared with $168 for all SNF days. Reimbrusement of routine swing-bed services based on the State Medicaid program's average per diem reimbursement to skilled nursing facilities for routine care services during the previous year kept the difference in reimbursement per day to only $2 in 1987 ($79 to $77).

A second report evaluated the impact of Medicare's prospective payment system (PPS) on the swing-bed program nShaughnessy et al., 1988). This evaluation found that, despite higher per diem costs for post-acute swing-bed services that overall costs for an episode of illness tended to be lower for patients discharged from a swing-bed hospital ". . .patients discharged from acute care in hospitals with swing-bed programs were more likely to receive swing-bed care than patients discharged from comparison hospitals. Such patients also received less Medicare nursing hoem (SNF) and home health care. Subsequent acute care use and cost also tended to be lower for patients discharged from acute care in swing-bed hospitals. The overall result was a slightly lower total cost of care (both excluding and including the cost of the initial acute care episode) for patients discharged from acute care in swing-bed hospitals."

One factor that may explain the narrowing gap from 1984 to 1987 in the Medicare reimbursement per day is the decreasing average length of covered stay in all SNFs, including skilled nursing services furnished by swing-bed hospitals (Table 3). As shown in Table 3, this average decreased from 26.l days in 1984 to 21.5 days in 1987. This would reflect the decrease in SNFs, since during the period 1984-87, the average length of nursing care stay incrased in swing-bed hospitals. The shorter length of stay decreases the proportion of payment to SNFs made by beneficiaries because of the coinsurance kicking in othe the 21st day. Thus, Medicare payments averaged over fewer coinsurance days increases the average Medicare payment per covered day.

Another factor narrowing the difference in the average reimbursement per day may be the method of reimbursing for post-acute routine care services by swing-bed hospitals. Ancillary services which include: supplies, operating room use, drugs, laboratory and radiology services, and anesthesia, are reimbursed at cost. The per diem amount that swing-bed hospitals received for routine care services is based on the State Medicaid program's average per diem reimbursement to skilled nursing facilities for routine care services druing the previous year. For the purposes of the ensuing discussion, accommodation charges will be referred to as charges for routine care services. Routine care charges are usually characterized as room and board charges, but embedded in the cost base on which the charges are establsihed are allocations for such overhead costs as general and nursing administrative services, maintenance and repairs, operatio of the physical plant, laudry and linen, housekeeping, dietary services, central services and supply, medical records, and social services. The per diem average amounts charged to Medicare from 1985 through 1987 by swing-bed facilities and SNFs for accommodations and ancillary services to skilled nursing care patients are shown in Table 4. [1]

The average per diem routine care charges by swing-bed hospitals increased by about one-half the rate of increase of the SNFs (Table 4). [2] Average per diem charges for ancillary services furnished by SNFs increased at more than double the rate of swing-bed hospitals although the latter was still 50-percent higher in 1987. The latter relationship is not unexpected, given the characteristics of post-acute swing-bed patients described earlier and the greater access to ancillary services generally available in hospitals. In interpreting tthese figures, the reader should bear in mind that from 1985 through 1987 total covered days of care furnished by SNFs decreased.

Based on the data available for this analysis, it is not possible to apportion reimbursements to routine care or ancillary services. Assuming there is a concomitancy between costs and charges, it is clear that reimbbursements per day to SNFs have been rising in closer consonance to the rise in covered charges than has been the case for swing-bed hospitals (Table 3). This suggests that the current method of paying for routine swing-bed services may not be keeping up with the rate of increase in the hospital's costs of providing routine swing-bed services. However, in light of increasing participation in the swing-bed program, it may be supposed that swing-bed hospitals were still recovering the marginal cost of furnishing post-acute routine swing-bed services in 1987. Base on 1984 data, the evaluation report estimated that, on average, swing-bed hospitals incurred an incremental cost per day for routine post-acute care of about $33 to $34. The average routine care revenues received exceeded the costs by $8 to $10 per day. The 1987 data suggest that the difference between marginal routine care costs and revenues may be narrowing. However, given full cost reimbursement for ancillary services, the marginal revenue for otherwise empty beds seem to be attractive for eligible hospitals.

The geographic distribution of the use of and Medicare payments for swing-bed services in 1987 in relation to all SNF services is shown in Table 5. As expected, the number of swing-bed hospitals and the use of swing-bed services were concentrated in the North Central and South census regions which contain large expanses of rural areas. Of the 1,058 hospitals that submitted a bill for swing-bed services, almost one-half (504) were located in the North Central States. Another one-third (359) were located in the South. (3) Only 16 hospitals in the Northeast Region were certified to furnish swing-bed services: 9 in New Hampshire, 4 in Vermont, and 3 in Pennsylvania. Of the 179 hospitals certified in the West to furnish swing-bed services, 131 (73 percent) were in the Mountain States.

In the North Central States, 18 percent of all admissions for SNF services were to swing-bed hospitals. In the South, almost 12 percent of SNF admissions were to swing-bed hospitals. In the largely urbanized Northeast, less than 1 percent of the admissions for SNF services were made to swing-bed hospitals. However, New Hampshire and Vermont are notable exceptions to the patterns of the Northeast. In these two States, more than one-fourth of the admissions for SNF services were to swing-bed hospitals. Admissions to swing-bed hospitals are based on the residence of the patient. Where admissions to swing-bed hospitals are noted in States with no swing-bed facilities, admission to a facility in a neighboring State is the probable explanation.

The West census region presents a dichotomy between the Mountain States and Pacific Coast States. In the Mountain States, almost 12 percent of the admissions for SNF services were to swing-bed hospitals. In four of the Mountain States (Montana, Idaho, Wyoming, and New Mexico), more than 20 percent of the admissions for SNF services were to swing-bed hospitals with Wyoming having almost 60 percent going to swing-bed hospitals. The remaining Mountain States show less than 10 percent of the admissions for SNF services going to swing-bed hospitals. Only 1 percent of the admissions for SNF services in the Pacific Coast States went to swing-bed hospitals; Alaska, with 21 percent, was the only Pacific Coast State with more than 7 percent using swing-bed hospitals for SNF care. Alaska had a total of only 122 admissions for SNF services.

The States showing more than 50 percent of the admissions for SNF services going to swing-bed hospitals were: North Dakota, South Dakota, Kansas, Mississippi (the highest at 89 percent), and Wyoming, Delaware and the District of Columbia were the only jurisdictions with no admissions for swing-bed services. Figure 1 displays the geographic patterns of admissions to swing-bed hospitals as a percent of all SNF admissions.

For the individual States, the relationship among admissions, covered days of care, charges, and reimbursement is about that indicated for 1987 in Table 2. A notable exception is Mississippi. As previously mentioned, about 89 percent of the admissions for SNF services in Mississippi went to swing-bed hospitals. Swing-bed hospitals accounted for almost 91 percent of the covered SNF days of care and received 82 percent of SNF reimbursements. Mississippi was the only State in which the average length of SNF stay in a swing-bed hospital (18.2 days) exceeded the statewide average (17.9 days).


The data presented in this article and the findings of the evaluation indicate that the rural hospital swing-bed program has been working as might have been anticipated:

* Swing-beds have assumed the provision of a significant portion of post-acute care services in many States with large rural areas.

* The post-acute case mix in swing-bed hospitals represent more short term, intense level of care requirements than those in SNFs. Swing-bed hospitals seem better suited to meeting nursing care needs of these types of patients than do rural SNFs, which seem more suited to meeting the needs of the traditional long-term care nursing home patients.

* Higher average total charges per day for swing-bed patients suggest that they tend to be more expensive to care for than are the patients in SNFs; especially in the use of ancillary services.

* Per diem reimbursements for swing-bed services have been growing at an average annual rate of about one-third of that for SNFs.

The latter finding raises question as to whether the current basis for reimbursing for post-acute routine care services in swing-bed hospitals causes per diem revenues to rise at a slower rate than per diem costs. The current difference between marginal costs and revenues seem sufficient to attract increasing participation by rural hospitals with fewer than 50 beds. However, given the different behavior of the overhead as well as the direct cost components of the costs for routine care services in hospitals and SNFs, the current method of paying for routine swing-bed services may require re-examination some time in the future. This may become more apparent when the experiences of the larger rural swing-bed hospitals brought into the program by the Omnibus Budget Reconciliation Act of 1987 (Public Law 100-203) are analyzed. Under this legislation, the swing-bed option was extended to rural hospitals with fewer than 100 beds. Providing an incentive to small rural hospitals to continue rendering swing-bed services may require re-examination of the bases on which payment for these services are made.


(1) Prior to 1985, the Medicare Statistical System did not separately record charges by their accommodations and ancillary services components.

(2) The sum of average per diem accommodation and ancillary charges in Table 4 is greater than the average covered charges in Table 3 because some of the accommodations and or ancillary charges may have been deemed to be noncovered under Medicare.

(3) The number of hospitals submitting bills for swing-bed services differs from the number certified on July 31, 1987, for the following reasons: Hospitals can be certified at any time during the year (additional hospitals became certified after July 31, 1987); The number of hospitals submitting bills is not the same as the number certified during the year because a certified hospital may not have provided swing-bed services during the year, and a Hospital may choose to terminate its certification to furnish swing-bed services.


Shaughnessy, P.W., Schlenker, R.E., and Silverman, H.A.: Evaluation of the national swing-bed program in rural hospitals. Health Care Financing Review. Vol. 10, No. 1. HCFA Pub. No. 03274. Office of Research and Demonstrations, Health Care Financing Administration. Washington. U.S. Government Printing Office, Fall 1988.

Shaughnessy, P.W., Schlenker, R.E., Hittle, D.F., et al.: Rural Acute and Postacute Care Under Medicare's Prospective Payment System. Contract no. HCFA-500-83-0051. Prepared for Health Care Financing Administration. Denver, Co. University of Colorado, Dec. 1988.
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Author:Silverman, Herbert A.
Publication:Health Care Financing Review
Date:Mar 22, 1990
Previous Article:Institutional alternatives to the rural hospital.
Next Article:Geographic variations in Medicare utilization of short-stay hospital services, 1981-88.

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