Bundled payments lead to quality improvements in hospitals' skilled nursing facility referral networks.

To assess whether hospitals participating in Medicare's Bundled Payments for Care Improvement (BPCI) program for joint replacement changed their referral patterns to favor higher-quality skilled nursing facilities (SNFs). Retrospective observational study using 2009-2015 inpatient and outpatient claims from a 20% sample of Medicare beneficiaries undergoing joint replacement in US hospitals (N = 146,074) linked with data from Medicare's BPCI program and Nursing Home Compare. We ran fixed effect regression models regressing BPCI participation on hospital-SNF referral patterns (number of SNF discharges, number of SNF partners, and SNF referral concentration) and SNF quality (facility inspection survey rating, patient outcome rating, staffing rating, and registered nurse staffing rating). We found that BPCI participation was associated with a decrease in the number of SNF referrals and no significant change in the number of SNF partners or concentration of SNF partners. BPCI participation was associated with discharge to SNFs with a higher patient outcome rating by 0.04 stars (95% CI, 0.04-0.26). BPCI participation was not associated with improvements in discharge to SNFs with a higher facility survey rating (95% CI, -0.03 to 0.11), staffing rating (95% CI, -0.07 to 0.04), or registered nurse staffing rating (95% CI, -0.09 to 0.02). BPCI participation was associated with lower volume of SNF referrals and small increases in the quality of SNFs to which patients were discharged, without narrowing hospital-SNF referral networks.