Hospital readmission within 30 days of discharge is an important quality measure given that it represents a potentially preventable adverse outcome. Approximately, 20% of Medicare beneficiaries are readmitted within 30 days of discharge. Many strategies such as the hospital readmission reduction program have been proposed and implemented to reduce readmission rates. Prior research has shown that coordination of care could play a significant role in lowering readmissions. Although having a hospital-based skilled nursing facility (HBSNF) in a hospital could help in improving care for patients needing short-term skilled nursing or rehabilitation services, little is known about HBSNFs' association with hospitals' readmission rates. This study seeks to examine the association between HBSNFs and hospitals' readmission rates. Data sources included 2007-2012 American Hospital Association Annual Survey, Area Health Resources Files, the Centers for Medicare and Medicaid Services (CMS) Medicare cost reports, and CMS Hospital Compare. The dependent variables were 30-day risk-adjusted readmission rates for acute myocardial infarction (AMI), congestive heart failure, and pneumonia. The independent variable was the presence of HBSNF in a hospital (1 = yes, 0 = no). Control variables included organizational and market factors that could affect hospitals' readmission rates. Data were analyzed using generalized estimating equation (GEE) models with state and year fixed effects and standard errors corrected for clustering of hospitals over time. Propensity score weights were used to control for potential selection bias of hospitals having a skilled nursing facility (SNF). GEE models showed that the presence of HBSNFs was associated with lower readmission rates for AMI and pneumonia. Moreover, higher SNFs to hospitals ratio in the county were associated with lower readmission rates. These findings can inform policy makers and hospital administrators in evaluating HBSNFs as a potential strategy to lower hospitals' readmission rates.