Freestanding Skilled Nursing Facilities: Any

Differential Medicare payments for hospital-based and freestanding skilled nursing facilities (SNFs) were eliminated by the SNF prospective payment system initiated in 1998. Closures and high negative margins of hospital-based facilities have prompted consideration of the need to revisit payment adjustments for this group of SNFs. We examine case mix-related and other factors behind the cost differences between hospital-based and freestanding SNFs. Some payment adjustment, notably for nontherapy ancillary services, may be reasonable for the short term. The differential Medicare payments for hospital-based and freestanding skilled nursing facilities (SNFs) have long been a controversial public pol-icy issue. At the heart of the issue are the reported higher costs of hospital-based SNFs relative to those of freestanding SNFs. Controversy has ex-isted over whether Medicare should recognize the causes behind the cost differences as appro