Hospital Ownership of Nursing Homes and Readmission Rates: An RDT and TCE Approach

Prevention of inpatient hospital readmission is a salient issue for US hospitals that participate in the Medicare program because of Affordable Care Act (ACA) reforms that financially penalize hospitals for excess readmissions. Hospitals are held accountable for patients who may receive post-discharge care in independent facilities over which hospitals may have little influence to promote quality or monitor care. This analysis applies theories of resource dependence and transaction cost economics to empirically test whether hospitals that own skilled nursing facilities (SNFs) demonstrate better outcomes for patients in the form of reduced readmissions. Regression results of this study suggest a weak relationship between nursing home ownership and reduction of readmissions. While our findings are insufficient to unequivocally promote nursing home ownership as an effective management method for the reduction of hospital readmissions, they do offer support for the theoretical advantages of ownership. This relationship remains a promising avenue of inquiry for researchers, as well as hospital managers charged with navigating their organizations through value- based healthcare reforms. As ACA reforms and health system integrations reach levels of maturity, they may be more likely to realize the theorized advantages of hospital ownership of SNFs.