Postacute Care Spending

By September 9, 2019 Commentary

Post-acute care, which includes skilled nursing facilities, home care, rehab hospitals and other providers, has been the source of much of the geographic spending variation in Medicare’s fee-for-service arm and also of spending growth.  It has been riddled with providers who engage in fraud and abuse.  Medicare has attempted to reform payment for these services several times, without a lot of impact.  A new study in Health Affairs tries to compare post-acute spending in the Medicare population with that for a similar group of patients with commercial health insurance to understand if there are substantial differences and what those differences are.   (HA Article)   Post-acute care is costing Medicare $60 billion a year.  As pressure grew to reduce inpatient length of stay, hospital discharge planners arranged more use of skilled nursing and home care, which contributed to the growth in spending.  Some types of inpatient stays now are paid for with a bundle that includes post-acute care, and hospitals under those payments have been able to reduce use of post-acute care without negatively affecting quality.  The authors looked at post-acute care use and spending in Michigan for a group of Medicare beneficiaries and patients covered by private health plans.  The private plan patients were aged 60 to 64, so close to Medicare eligibility, and the Medicare patients were age 65 to 69, so just past eligibility age.  Six reasons for hospitalization were included–heart attack, heart failure, stroke, coronary bypass surgery, total hip replacement and colectomy.

The researchers then examined four types of post-acute spending–home health, skilled nursing, inpatient rehab and outpatient rehab.  They attempted to match the patient cohorts on the usual demographic and health status variables.  For five of the six conditions studied, there was a significant increase in price-standardized spending for patients around age 65.  The increase was dramatic, ranging from 68% to 230%.  For heart attack, for example, the average increase was $703 per episode, or 98% more than for patients under age 65 and commercially insured.  Only stroke did not show a statistically significant increase in spending, although there was an increase of $628 per episode in post-acute spending for that condition in the Medicare group.  For some conditions Medicare patients were much more likely than commercial ones to have some use of post-acute care.  The intensity of post-acute care accounted for most of the spending difference–Medicare patients for example tended to have more use of home health care and longer stays in a skilled nursing facility.  This increase in spending among the Medicare patients was not associated with a lower rate of hospital readmissions.   These results once again demonstrate that providers are keenly aware of who is paying the bill and make sure they maximize their revenue under the reimbursement system.  Medicare currently often incentivizes more use of post-acute care and providers respond to that incentive.  There would appear to be a good opportunity for CMS to revisit how it pays for post-acute care to reduce overuse and excessive spending.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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