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We examine whether vertical integration of hospitals and skilled nursing facilities (SNFs) could lessen competition by foreclosing rival SNFs’ access to lucrative referrals. We find that it could: among integrated providers, a one percent increase in SNF reimbursement for a given patient discharged from the upstream hospital increases the self-referral rate to the hospital’s downstream SNF(s) by 1.8 percent. We find no evidence of offsetting benefits for patients and payers: these increased self-referrals have an imprecisely estimated zero effect on patient outcomes and Medicare spending.
