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What Hospitals, Health Systems, and ACOs Need to Understand about Post-Acute Care

Posted by Matthew Smith on May 26, 2015 2:26:00 PM

We spend a lot of money on post-acute care. Some pundits think we spend too much ($58.6 billion in 2012 according to Medicare Payment Advisory Commission’s [“MedPAC”] June 2014 Data Book), and they might be right. From a national perspective, 43 percent of Medicare discharges go to post-acute care, and given our fee-for-service traditions, there has been little call for hospitals and systems to understand, much less get to know, post-acute providers. A typical community hospital might refer patients to as many as 30 skilled nursing facilities (“SNFs”) and more than a dozen home health agencies with little regard for their capabilities or outcomes. In the shifting landscape of healthcare reform, post-acute plays a big role in shaping both outcomes and spending. To that end, here are three issues healthcare leaders should understand about post-acute care.

Post-Acute Spending is Highly Variable and Needs Better Control

In our fee-for-service mentality, we have never been really concerned about readmissions, nursing home length-of-stay (“LOS”), or patient perception of post-hospital care. By virtue of their reimbursement systems, post-acute has been left on its own with almost no controls around utilization or performance.

With the shift to fee-for-value, however, the impact of post-acute use and spending has come under newfound scrutiny. While long suspected, recent studies have established that post-acute care represents the single largest area of variability in Medicare spending. A 2011 MedPAC study confirmed post-acute spending can vary from $60 per member per month to nearly $450 per member per month, depending on geography. In 2013, the Institute of Medicine’s Committee on Geographic Variation found that 70 percent of variation in Medicare spending is attributed to post-acute use alone.

For hospital and systems, particularly those participating in an ACO or working towards the value-based paradigm, this post-acute variability represents an enormous Achilles heel. SNFs that “optimize” LOS, or home health agencies that repeatedly readmit to achieve greater revenues, can unnecessarily drive up Medicare Part A spending, and as a result, the total cost of care for a given beneficiary. As a handful of early ACOs and fee-for-value adopters have learned, getting to know your post-acute providers and developing formal relationship or networks is central to addressing these variations in use, and ultimately, spending and outcomes.

Post-Acute is Inherently Schizophrenic and Competitive

Many presume that post-acute care is just another kind of “continuum” – an interconnected sequence of services or settings that support post-hospital care. While post-acute service typically occurs after an acute inpatient stay, and there is sometimes a referral from one post-acute setting to another (i.e., SNF to home health), post-acute is highly disconnected within itself and has considerable overlap.

SNFs and home health agencies (which account for about 80 percent of all post-acute services nationally) are an excellent example. Post-acute care in SNFs evolved to address medically-complex patients requiring rehabilitative therapies while home health historically took on less complex patients with fewer needs. In the last 10 years, the lines between these two providers have blurred dramatically. Home health has ramped up its clinical skill to address complex wounds, congestive heart failure, and other patients who might have historically gone to a SNF. Many post-orthopedic procedure patients are now serviced by home health. As a result, SNFs have worked to take on more complex patients – those who might have gone to an inpatient rehabilitation facility (“IRF”) or even a long-term acute care hospital (“LTACH”). All of this has created both tension and increasing competition among different kinds of post-acute providers. The Centers for Medicare & Medicaid Services has worked to address some of these issues by redefining criteria for some settings (IRF and LTACH in particular) and suggesting site-neutral payment as one means, challenging the industry to sort out its differences. Bundled payment will also challenge traditional thinking as it gains more traction and becomes the dominant form of payment for post-acute services.

For a hospital or system seeking the “right” setting for a post-acute bound discharge, the prospects can be daunting. There is no uniform patient assessment tool for post-acute, and it is not unusual for patients to be placed in the wrong setting – sometimes at significant financial cost (e.g., $26,000 for a typical SNF-based episode vs. $64,000 for an LTACH episode). Understanding the differences among post-acute settings and determining appropriate settings for post-acute bound patients are critical for those organizations focused on the Triple AimTM. Providers need to re-engineer discharge planning, know how to pick the right partners, and improve communication both with and among post-acute providers.

Post-Acute is Eager to Partner and Adapt to the New World

Hospitals, health systems, and ACOs looking for the right post-acute organizations are often surprised by what they find. Most post-acute providers are willing and eager to engage. They understand the importance of a clinically integrated future, desire preferred relationships, and are facing their own value-based program expectations around quality reporting, readmissions, and payment.

Building the right kind of partnership, however, won’t just happen because you say so. Hospitals, health systems, and ACOs need to engage post-acute providers as active partners and treat them as equals in creating systems, tools, and networks to successfully treat and manage post-acute bound patients. There has been a lot of buzz about post-acute network development over the last 12-to-18 months, but much of that work has involved simply picking providers. Little of it has focused on actually engaging partners to fix the real problems – redesigning care, improving transitions, expanding physician coverage in post-acute settings, enhancing post-acute clinical skills, and creating measures of quality and performance that can drive long-term improvement. It is important to recognize that the hard work of change inside organizations must extend outside the walls or the historical view of the business.

The post-acute partnering pioneers of the past few years have seen tremendous results for their efforts – 20 to 50 percent drops in readmissions, impressive reductions in post-acute LOS, and dramatic shifts away from high-cost post-acute settings in favor of lower cost, comparably effective options. At the same time, patient satisfaction with improved acute/post-acute relationships hit an all-time high. For some, the approaches to post-acute partnering have even served as templates for partnership models addressing renal and behavioral health populations.

As we think about the next few years and the continued push towards greater integration and the goal of true population health management, post-acute care cannot be an afterthought or a minor footnote in any organization’s planning or thinking process. As post-acute continues to evolve, it will take on an ever-increasing role – shortening acute LOS, taking on unnecessary inpatient admissions, and managing the bulk of post-hospital care and service in a given episode. Now is the best time for hospitals, systems,and ACOs to step deeper into post-acute care, engage the right partners, and take the first steps towards a value-based acute/post-acute future.

Topics: ACO, Hospitals, Health Systems, Post-Acute Care, Post-Acute Spending

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