Reports from the Office of Inspector General (OIG) focusing on skilled nursing facilities (SNFs) highlight readmissions and never events as performance improvement opportunities.


In the past six months, the OIG has released two studies examining quality in SNFs. The most recent report, similar to a 2010 report focusing on adverse events in acute care settings, finds that one-third of SNF patients experience some type of adverse event.a Similarly, a report released late in 2013 found that 25 percent of SNF patients are admitted to a hospital (in effect, representing a hospital readmission).b This report makes it more likely that Congress will soon move to reduce payments to SNFs with relatively high levels of acute care admissions or readmissions. The findings from the OIG reports and the potential for SNF hospital readmissions penalties highlight the need for providers to understand their exposure to admissions from post-acute providers and to partner selectively with those actively working to improve quality and reduce unnecessary admissions. 

SNF Adverse Events

In the more recent report, the OIG looked at both adverse events and temporary harm events.c Using chart reviews across a representative sample of Medicare SNF patients and extrapolating from the results, the OIG estimates that 22 percent of beneficiaries experience an adverse event during a SNF stay. An additional 11 percent of beneficiaries experience temporary harm during a stay. The OIG estimates that, in 2011 alone, CMS spent $2.8 billion (excluding the cost to beneficiaries) on hospital care treating incidents of harm caused in SNFs. 

Physicians involved in chart reviews for the study determined that 59 percent of the temporary and adverse events were likely preventable. Unlike the hospital admissions study, the adverse events report did not identify the characteristics of SNFs with lower levels of adverse and temporary harm events relative to those with higher event levels. 

SNF Hospitalization Rates

In its report issued in late 2013, the OIG found that in 2011, SNFs transferred 25 percent of their Medicare patients to hospitals for admission. In total, CMS spent $14.3 billion on these admissions. Fifteen conditions accounted for 60 percent of inpatient admissions, with septicemia, pneumonia, congestive heart failure, urinary tract infections, and aspiration pneumonia the most common. 

Further, the OIG found significant variation in acute care admission rates across SNFs. At the low end of the spectrum, one quarter of SNFs transferred fewer than 20 percent of Medicare residents for admission to an acute facility, while another 30 percent of SNFs admitted 30 percent or more of their Medicare residents to hospitals. The study identified a positive correlation between CMS’s Five-Star Quality Rating System and hospital admissions from SNFs. SNFs with one, two, or three stars were more likely to have higher acute admission rates.

Although the OIG limited its recommendations to developing a measure to accurately capture SNF admission rates and including it as part of the state survey process, the report will add momentum to existing efforts to adjust SNF payments for avoidable hospital admissions. As CMS develops such a measure, the agency must balance the need to reduce preventable admissions from SNFs with the understanding that SNFs should not be penalized for medically necessary hospital admissions. 

Policy Options

In its 2012 report to Congress, the Medicare Payment Advisory Commission (MedPAC) recommended a penalty for SNFs with unexpectedly high rates of hospital admissions. Subsequent editions of President Obama’s budget also have proposed this policy. The various proposals would yield approximately $2 billion in savings over 10 years through reduced hospital admissions from SNFs and payment reductions to SNFs with high volumes of hospital admissions. 

The American Health Care Association (AHCA), the trade association for SNFs, has offered its own readmissions reduction plan that promises $250 million in annual savings related to reduced hospital readmissions.d If those savings are not achieved, then the 40 percent of SNFs with the highest readmissions rates would pay a penalty to reach the targeted savings. In 2013, HFMA sent CMS a comment letter addressing issues regarding CMS’s readmissions reduction program and expressing support for the alignment of incentives across the care continuum.e A SNF readmissions penalty was one of HFMA’s recommendations.

The AHCA also is proactively working to reduce readmissions from SNFs. Since February 2012, one of the goals of the AHCA’s quality initiative has been a 15 percent reduction in readmissions by 2015. The AHCA reports that since the organization launched the initiative, 30-day readmissions from its members have been reduced by 3.3 percent.f

Although the savings from a readmissions reduction policy aren’t significant compared with other options, the policy’s potential to improve outcomes and uncontroversial nature makes it likely that it will be used as an offset to other healthcare spending. Moreover, even absent changes in Medicare payment policy, the industry is taking steps to improve quality for patients. 

Provider Implications 

The implementation of a SNF readmissions penalty and ongoing efforts to decrease hospital admissions present both challenges and opportunities for providers. Hospitals—particularly those with a high Medicare patient mix—should understand their exposure to lost volume associated with a reduction in SNF readmissions. Using this knowledge, they can then develop strategies to mitigate the impact of decreased admissions on revenue and margins. Such strategies likely will focus on backfill opportunities where they exist and cost-efficiency improvement efforts.

A SNF readmissions penalty also provides an opportunity for hospitals, as the penalty aligns incentives across the care continuum. It can serve as the impetus for hospitals to identify and collaborate with high-quality post-acute care providers in the community to reduce readmissions and better prepare their organization to participate in bundled- and population-based payment pilots. North Shore-Long Island Jewish Health System, a Pioneer ACO, is an example of one such organization. The health system has made developing a high-value post-acute care network a strategic priority—with outstanding results. From 2010 to 2012, as a result of quality improvement activities across the network, North Shore-Long Island Jewish experienced a networkwide decrease in readmissions rates from 13 percent to 7.5 percent.

Chad Mulvany is director of healthcare finance policy, strategy and development, HFMA’s Washington, D.C., office and a member of HFMA’s Virginia-Washington, D.C., Chapter. 


a. “Adverse Events in Skilled Nursing Facilities: National Incidence Among Medicare Beneficiaries,” OIG, Feb. 27, 2014.

b. “Medicare Nursing Home Resident Hospitalization Rates Merit Additional Monitoring,” OIG, November 2013.

c. The OIG defines adverse events as errors ranging in impact from requiring an initial or prolonged facility stay to having contributed to or resulted in patient or resident death. The OIG defines temporary harm events as errors that may have contributed to or resulted in temporary harm and required intervention. 

d. Gifford, D., “Nursing Homes Are the Solution on Readmissions,” Health Affairs blog, Jan. 14, 2014.

e. “HFMA Proactively Comments on the CMS Hospital Readmissions Reduction Program,” HFMA, Jan. 30, 2013.

f. “Hospital Readmissions,” American Healthcare Association, 2014.

g. Hegwer, L., “Bridging Acute and Post-Acute Care,” Leadership, Fall/Winter 2013.

Publication Date: Tuesday, April 01, 2014

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