Well-documented shortcomings in Medicare’s payment system for skilled nursing facilities (SNFs) have prompted many revisions to the system. This study finds that Medicare’s payments to SNFs for therapy and non-therapy ancillary (NTA) services are the least accurate they have been since 2006. Payments are less reflective of cost differences across both stays and facilities and payments are less proportional to costs. An alternative design that would base payments on patient characteristics and establish separate payments for NTA services would increase payment accuracy and dampen the incentives to furnish excessive therapy and avoid patients with complex medical needs for financial gain.
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