Medicare Seeks To Curb Spending On
Post-Hospital Care That Varies Widely
Study shows cost of care after
leaving the hospital varies widely; Over 25% of Medicare spending in
Louisiana, Texas, Mississippi, Oklahoma and
Massachusetts for post-acute care – check your state
Jordan Rau, KHN Staff Writer
Dec. 2, 2013 - After years of
trying to clamp down on hospital spending, the federal government wants
to get control over what Medicare spends on nursing homes, home health
services and other medical care typically provided to patients after
they have left the hospital.
Researchers have discovered huge
discrepancies in how much is spent on these services in different areas
around the country.
…In Connecticut, Medicare beneficiaries are more than twice as
likely to end up in a nursing home as they are in Arizona.
…Medicare spends $8,800 on each Louisiana patient getting home
health care, $5,000 more than it spends on the average New Jersey
…In Chicago, one out of four Medicare beneficiaries receives
additional services after leaving the hospital—three times the rate in
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Medicare per capita spending on
these services, collectively known as post-acute or post-hospital care,
has grown at 5 percent a year or faster in 34 of the nation’s 50 most
populous hospital markets in recent years, according to an analysis
health care economist Chapin White conducted for Kaiser Health News.
Last year $62 billion - one out of
every six dollars Medicare spent in the traditional fee-for-service
program - went to nursing and therapy for patients in rehabilitation
facilities, nursing homes, long-term care hospitals and in their own
according to a congressional advisory panel.
Most of them got those services
after coming out of the hospital. Some of these providers earn
double-digit profits from Medicare through a hodgepodge of payment
methods that health experts say encourages unnecessary and disjointed
care, wastes taxpayer money and makes fraud easier. More than a quarter
of Medicare spending in Louisiana, Texas, Mississippi,
Oklahoma and Massachusetts was for post-acute care in
Medicare records show.
Hospitals are often the gatekeepers
to this world. But analysts say they do not take costs—or sometimes
patients' best interests—into account when discharging patients. "They
have not had to think remotely about costs or quality or anything except
where's a bed available," said Anne Tumlinson, a consultant at Avalere
Health in Washington.
"Often doctors have very little to
do with the discharge decision. Largely it has to do with the supply of
providers and type of providers in the area."
Now, Medicare is experimenting
payment methods in which hospitals and post-acute providers
would be given a lump sum to take care of a patient, forcing them to
become more efficient if they want to make money. In addition, President
has proposed reducing payments for some conditions to
post-acute providers and beginning to pay the same rates for similar
Stephen Parente, a health care
economist at the University of Minnesota, says the changes are likely to
upend much of the industry. "It's going to be a fairly ugly transition
to get to a more efficient, streamlined system," Parente said. "It's
going to be a consultant's bonanza."
Many Options For Care
Ironically, the growth of the
post-hospital industry can be traced back to actions Medicare took in
the 1980s to clamp down on long inpatient hospital stays. Medicare
started paying hospitals set sums for each patient stay, giving them a
financial impetus to discharge patients as soon as possible. New
services sprung up in response around the country to take these
patients, often with business models that sought to maximize the money
they could earn from Medicare.
The vagueness of the term
"post-acute" reflects the wide array of ways Medicare patients can be
treated after they leave the hospital. Those robust enough to return
home can receive intermittent visits from nurses, physical therapists
and aides who monitor their condition and assist in basic tasks. These
services are known as home health.
Patients needing closer oversight can
end up in nursing homes or the more intense inpatient rehabilitation
facilities, where people suffering strokes, major joint replacements and
fractures often end up. The sickest patients, such as those who need
ventilators to breathe for weeks, may be admitted to long-term care
hospitals, where the average stay is 26 days.
Medicare pays each type of facility
different rates -- even when they are treating the same kinds of
patients. Medicare’s cost for treating stroke patients, including time
in the hospital and three months of subsequent care, averages $40,000 if
the patient is discharged to an inpatient rehabilitation facility,
according to an analysis
by Congress’s Medicare Payment Advisory Commission (MedPAC).
Medicare’s cost averages $33,000 for stroke patients discharged instead
to a nursing home, and only $13,000 for those cared for at home with the
assistance of health aides, the analysis found.
These varying payment rates were
created under the assumption that many sicker patients would need to be
in facilities that could provide more intensive care. But researchers
have found evidence that the same types of patients can end up in
different types of facilities for no apparent medical reason.
Jim Prister, president of RLM
Specialty Hospital in Chicago and Hinsdale, Ill., said that his
long-term care hospitals turn down about half the patients hospitals
refer because they do not meet Medicare's criteria. "We don't rely on
what the [hospital's] care coordinator says," Prister said. "We have a
pretty large team of RNs that go out and see every patient."
of Medicine study released in July concluded that
post-hospital services are the primary reason that Medicare spends much
more in some parts of the nation than elsewhere. Uneven spending on
post-acute care around the country accounts for
73 percent of the variation in Medicare
spending. White's analysis of Medicare records for Kaiser
Health News found that home health spending in 2011 accounted for a
quarter of the reason that some areas were more costly than others.
In McAllen, Texas, doctors and
received most of the criticism for the region's high Medicare
spending, which is greater than in any other part of the country except
records, however, show inpatient hospital use and spending in
2011 was around the national average, and outpatient care was
significantly below average. McAllen’s post-acute spending was the true
McAllen beneficiaries were more than 2 1/2 times as likely to
use home health services, long-term care hospitals and rehab facilities
than were the average Medicare beneficiary in 2011. As a result,
Medicare spent $4,752 per capita on post-acute services, while the
national per capita spending average was $1,894.
Much post-hospital use is
determined by which facilities are around. A third of all home health
care cases took place in Florida, Louisiana, Mississippi, Oklahoma and
Texas even though only 17 percent of Medicare beneficiaries live in
those states, says MedPAC.
Aggressive marketing plays a role
in where patients get sent, said Jared Landis, a consultant at The
Advisory Board, a consulting company for health care providers.
"Anecdotally, it is a market where post-acute discharge is heavily
affected by personal relationships, traditional sales and marketing—just
building those personal relationships around those small gifts, those
cookies," he said.
For many companies, these patients
translate into substantial profits. Nursing homes are expected to earn
between 12 and 14 percent this year on their Medicare patients,
MedPAC estimates. Home health
margins are expected to average 12 percent, and intensive rehabilitation
facilities margins are around 8.5 percent, MedPAC estimates. Long-term
care hospitals, the laggard of the post-acute groups in profits, are
earning almost 6 percent.
The post-acute care industry has
defended these profit margins by saying that they counterbalance the
losses their facilities receive from lower Medicaid payments in many
states. "If you start targeting the one healthy aspect of skilled
nursing that pays for the services provided, that's going to pose real
jeopardy to the entire profession," said Greg Crist, a spokesman for the
American Health Care Association, which represents nursing homes.
Policy experts say providers tailor
their approaches to wring the most money out of Medicare's payment
methods. Nursing homes, for instance, are paid per day, encouraging
homes to keep patients for as long as possible up to the 100-day limit
Medicare set. Medicare picks up the entire tab for the first 20 days.
MedPAC calculates that even including money-losing Medicaid patients,
nursing homes earned profits between 4 to 6 percent in 2011, the most
recent year for which they have data.
Home health agencies are paid set
sums for 60 days with no regard for how many nursing and aide visits are
made. The number of visits in the average 60-day period dropped from 32
in 1998 to 19 in 2011, while the number of patients being enrolled in
home health soared, with the majority no longer coming straight from the
hospital, according to MedPAC.
"The incentive is to sign up
patients who need hardly anything and sign them up for as long as you
can get them," said Judy Feder, a professor at the Georgetown Public
At times, efforts to game Medicare
have veered into outright fraud, particularly in home health. The
Centers for Medicare & Medicaid Services this summer placed a temporary
moratorium on new home health agencies in Miami and Chicago. In
testimony before a congressional budget writing panel in June, CMS
deputy administrator Jonathan Blum said agency auditors had discovered
nursing homes billing for services that were never provided and home
health agencies billing for people who were well enough to leave their
homes. "Some of these improper billing practices point to potential
overtreatment of Medicare beneficiaries, with patients receiving more
intensive care than is medically warranted," Blum testified.
Even though the transition out of
hospitals can be one of the most perilous times for patients, many
hospitals have not forged close relationships with post-acute
facilities. Avalere's Tumlinson analyzed where patients from 10
different Chicago hospitals in 2010 went after discharge. She found that
on average the hospitals sent patients to 130 different nursing homes.
She said, "How on earth can a hospital ever get a handle on this and
have a relationship with the patient post discharge if they’re dealing
with this many different skilled nursing facilities?"
Experiments authorized by the federal health
law and now being conducted by the Center for Medicare &
Medicaid Innovation aim to alter the financial calculus for both
hospitals and post-acute providers. The center has
received proposals for 178 "bundled payment" experiments in
which hospitals and post-acute providers will work together to treat
Medicare patients for a fixed sum, instead of being paid
separately. Another 157 experiments involving only the post-acute
providers have also been created, many by private companies that have
recruited medical providers.
One company is NaviHealth, created
by former CMS administrator Tom Scully. NaviHealth evaluates
hospitalized patients to determine where they should be discharged
afterward, and then birddogs their care along the way. NaviHealth has
proposed Medicare bundled payment experiments with hospitals in
Tennessee, Oklahoma, New Mexico and New Jersey.
"We catch patients in their second
day in the hospital and come up with a very detailed evaluation of their
functional status," Scully said. "Maybe you should be in the rehab
hospital for 14 days, or nursing home for 10 days instead of 20 days,"
which is the most days before Medicare starts charging patients a
co-payment. Otherwise, he said, "the nursing home will keep you for the
maximum days they can. It's nobody's fault, it's just the incentives."
NaviHealth is already managing the
post-acute treatment for patients in private Medicare Advantage plans
and Medicare supplemental plans. After John Alzapiedi, an 85-year-old
retired technical service representative from Clinton, Mass., fractured
his ankle, NaviHealth oversaw his care last summer as he moved to a
nursing home to recover from surgery and a subsequent infection.
"Once I got home, there were four
of them who started visiting, one for physical therapy," Alzapiedi said.
The others were a nurse, a case manager and a coach to help him with his
medication. "I'd say overall things are going pretty good," he said.
Companies such as NaviHealth are
betting that similar services will be in high demand. Obama wants to cut
payments for post-acute providers, pay rehabilitation facilities and
nursing homes the same rates, and penalize nursing homes when their
patients end up back in the hospital. He also has proposed making paying
lump sums for a patient’s post hospital care, just as Medicare does with
But just as the hospital lump
payment system led to the explosion in post-acute care, some experts are
warning that the ideas now being touted as improvements for this sector
could have unintended consequences. "The incentive is to avoid the sick
and skimp on services," Feder said.
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