Hospitalizations originating from nursing home (NH) are of great concern because of their related high costs, as well as the potential adverse health outcomes for frail NH residents. Studies have shown that not all of these hospitalizations are driven by clinical needs. In particular, research suggests that Medicaid residents experience a higher hospitalization rate than private-pay residents even after accounting for their health conditions. Although some studies have suggested that NHs with a higher proportion of Medicaid residents are more likely to hospitalize their residents, it is unclear whether NHs make different hospitalization decisions for similar Medicaid and private-pay residents within the same facility (referred to within-facility differences in this proposed study). It is important to examie these within-facility differences because they have specific and important policy implications. The long-term goal of this study is to reduce unnecessary hospitalizations among NH residents. The objective of this proposal is to understand how non-clinical factors - specifically payment source - affect NH residents' risk of being hospitalized. Specifically, it will examine whether thee are within-facility differences in hospitalizations between Medicaid and similar private-pay residents. The rationale for this study is that within-facility differences in hospitalizations between Medicaid and their private-pay counterparts is likely to be associated with NHs' financial incentives derived from Medicaid policies (e.g. Medicaid payment rate and bed-hold policies), and hospitalizations that are driven at the margin by financial incentives are likely tobe clinically unnecessary. By using national 2009 data, this proposed study has two aims. Aim-1 is to examine within-facility differences in hospitalizations between Medicaid and private-pay residents by testing the following hypotheses: (1) Hypothesis 1: Medicaid residents are more likely to be hospitalized than similar private-pay residents within the same NH; and (2) Hypothesis 1.1: The within-facility differences in hospitalizations between Medicaid and private-pay residents are smaller for non-discretionary conditions compared with discretionary conditions. Aim-2 is to explore whether the within-facility differences in hospitalizations between Medicaid and private-pay residents vary across states with different Medicaid policies. Although this aim is exploratory, it will pave the way to further in-depth studies of the relationship betwen Medicaid policies and potentially unnecessary hospitalizations among Medicaid residents, and ultimately provide guidance for better designed Medicaid policies. Reducing hospitalizations is an important and timely issue which is one of the current foci of the Center of Medicare and Medicaid Services (CMS) policies. Results from this study will improve our understanding of the non-clinical forces that drive differences in NH hospitalization rates between Medicaid and private-pay residents, which contribute to overall unnecessary hospitalizations. Design of effective policies to ameliorate these differences will improve NH residents' quality of care and cut Medicare costs.