Medicare’s Payments to Long-term Care Hospitals

I confess that I have never understood the arcane method of classifying providers that Medicare sometimes uses.  One is long-term care hospitals.  And Medicare tends to provide different reimbursement to different provider classes even though they seem to be rendering the same care to the same patients.  This is clearly exposed in a new paper from the National Bureau of Economic Research.   (NBER Paper)   The researchers tried to ascertain if there was any valid reason to pay these long-term care hospitals more than a skilled nursing facility, for example, is paid, and really ended up suggesting that we don’t need these facilities at all.  Hospitals are intended for acute care–when patients need intensive monitoring around a surgery or an extreme exacerbation of a disease.  After the acute care episode, some patients need follow-up care and that can occur at home, in a skilled nursing facility, in a rehabilitation facility if there is specific physical or other therapy needed, or a long-term care hospital, which as best I and the authors can tell, serves no purpose different from a skilled nursing facility.  When the classification and reimbursement was created there were few of these facilities, but of course, since the reimbursement is likely quite profitable, we now have several hundred of them, mostly operated by for-profit chains.  There wouldn’t be that growth if there wasn’t that profit opportunity, which pretty much tells you all you need to know.  Kind of like the 340B drug pricing program.

Anyway, Medicare now pays these hospitals about $5.4 billion in 2014 for care that could be provided much more cheaply in a skilled nursing facility, as LTCH reimbursement per day is over three times greater than SNF payments.  Patients incur more out-of-pocket costs as well.  The authors estimate Medicare would save $4.6 billion a year if it banned discharges to LTCHs.   The authors also attempt to ascertain whether LTCH appear to be providing better care or better outcomes for all that extra money and the answer appears to be no, in fact mortality might be higher.  In general, patients do better and prefer to be at home.   So why do long-term care hospitals exist at all, or if they do, why are they being paid more than SNFs?  Now $4.6 billion may not seem like a lot, but when you start adding up all the various similar Medicare issues, like paying hospital outpatient departments more for the same service than physician offices are paid, it adds up to a significant chunk of taxpayer dollars.  The reason, as usual, can be traced back to political lobbying.  We have only ourselves to blame for letting this situation continue.