The Medicare Catastrophic Coverage Act (MCCA) of 1988 altered eligibility and coverage for skilled nursing facility (SNF) care and changed Medicaid eligibility rules for nursing-home residents. Detailed data on the residents of a for-profit nursing-home chain and Medicare claims for a 1 percent sample of beneficiaries were used to examine the impact of the MCCA on nursing homes. The case mix of nursing-home admissions was scrutinized, specifically for length of stay, discharge disposition, rate of hospitalization, and changes in payer source. Findings revealed that, although the proportion of Medicare-financed nursing-home care increased, as did the case-mix severity of residents during the MCCA period, there was no corollary reduction in hospital use by nursing-home residents.