The health effects of nursing home specialization in post-acute care

Nursing homes serve both long-term care and post-acute care (PAC) patients, two groups with distinct financing mechanisms and requirements for care. We examine empirically the effect of nursing home specialization in PAC using 2011–2018 data for Medicare patients admitted to nursing homes following a hospital stay. To address patient selection into specialized nursing homes, we use an instrumental variables approach that exploits variation over time in the distance from the patient's residential ZIP code to the closest nursing home with different levels of PAC specialization. We find that patients admitted to nursing homes more specialized in PAC have lower hospital readmissions and mortality, longer nursing home stays, and higher Medicare spending for the episode of care, suggesting that specialization improves patient outcomes but at higher costs.