Prospective payment for nursing homes increased therapy provision without improving community discharge rates.

Objectives: To determine the impact of the prospective payment system (PPS) for skilled nursing facilities (SNFs) on therapy use and community discharge rates.

Design: Quasi-experimental study examining the predemonstration (1994) to demonstration (1997) change in amount of therapy provided, and in community discharge rates at PPS participating and nonparticipating facilities.

Setting: Eighteen PPS participating and 17 nonparticipating SNFs in five states.

Participants: Two thousand sixty-seven admissions to 18 PPS participating and 17 nonparticipating SNFs in five states.

Measurements: We compared changes in number of physical and occupational therapy visits per stay for patients receiving therapy and likelihood of being located in the community 60 days after admission between 1994 and 1997. Analyses were stratified by functional category and risk adjusted using multivariate methods.

Results: Demographics and percentage of patients in each stratum were similar in participating and nonparticipating sites and between 1994 and 1997. Amount of therapy received by the highest-functioning patients increased in participating sites (19.3 to 26.5 visits per stay, P = .005), but not in nonparticipating sites (23.3 to 18.2, P = .98). After adjusting for covariates, likelihood of community discharge for the highest-functioning patients did not change between participating and nonparticipating sites.

Conclusions: The highest-functioning patients treated under the SNF PPS demonstration experienced great increases in therapy, without any improvement in rate of community discharge.