The term “post-acute care” (PAC) covers a range of services patients receive after a hospital stay. Skilled nursing facilities, home health care agencies, long-term care hospitals, and inpatient rehabilitation hospitals all provide post-acute care. PAC providers are an important part of efforts to reduce hospital readmissions, which are a high-cost target for Medicare, Medicaid, and private health plans.

Post-acute care often serves the elderly, so Medicare is the largest, most influential payor. In 2010, post-acute care was the third-largest spending category in the fee-for-service Medicare budget, after physician and inpatient hospital services. Per capita Medicare spending was $1,446 on post-acute care, $1,862 on physician services, and $3,655 on hospital inpatient services.

Post-acute care should not be confused with long-term care (increasing referred to as long-term services and supports or LTSS).  State Medicaid programs are, by far, the largest buyers of long-term care.  Medicare only covers a limited range of skilled, largely post-acute care and does not cover genuinely long-term care or custodial care or home-based supportive services.  Medicaid does.

Post-Acute Payment Policy Troubles in Medicare:

Much of Medicare’s money for post-acute services sometimes goes to inefficient and low-quality care, according to the Medicare Payment Advisory Commission (MedPAC) 2013 Report to Congress. MedPAC releases a trove of data and recommendations each year to help improve Medicare payment policies, and the reports are often excellent. The 2013 report’s findings on post-acute care payment were some of the most interesting. This quotation sums it up well:

“Medicare’s definition of and payments for PAC services fail to establish incentives for providers to deliver efficient, high-value care.”

MedPAC found several specific issues to inform that statement. Here are some of the findings pulled from the report:

  • Post-acute care is not a well-defined term and the need for these services is not always clear. Patients who need PAC receive varying amounts of services, while other patients might be better served by going without PAC or by staying in the hospital a few more days.
  • Many PAC providers furnish similar services, yet Medicare pays different rates for them depending on the setting.
  • Without a common quality assessment instrument for PAC services, the quality of care and patient outcomes cannot be compared across settings, making it impossible to evaluate the comparative efficacy of services provided in different settings.
  • Providers have no incentive to consider the cost to Medicare of a patient’s total episode of care. Providers receiving a fixed prospective payment may discharge patients to another provider or setting to keep their own costs below the Medicare payment, even if that increases Medicare spending over the course of treatment.
  • PAC service use reflects financial incentives to increase volume under the fee-for-service payment model. For example, Medicare’s day-based payments to skilled nursing facilities encourage more days.
  • There are no incentives for care coordination across providers to promote safe care transitions and to prevent costly hospital readmissions.
Recommendations to Improve Medicare Post-Acute Care Payments:

MedPAC’s reports to Congress rarely identify a problem without recommending a solution, and the 2013 report proposed several remedies for Medicare post-acute care payment.

1. Bundled Payments and Accountable Care Organizations

Bundled payments, or episode-based payments, pay for all associated costs for a given condition for a specific patient. The new Center for Medicare and Medicaid Innovation (CMMI) has experimented with bundled payments to reduce costs for complex, expensive episodes. Among CMMI’s models is one that combines payment for care from both acute hospital and post-acute providers. Click here to read more about CMMI’s Bundled Payments for Care Improvement (BPCI) initiative. Employers and private health plans also are dabbling in bundled payments. See my previous blog post, Four Payment Reform Models of Keen Interest to Large Employers.

Accountable Care Organizations (ACO) are another effort to create incentives for providers to deliver higher quality care at a lower cost. Multiple providers band together to create an ACO, which assumes some of the risk of cost-overruns in care. If providers deliver quality care at a lower cost, they share some of the savings with Medicare through the Centers for Medicare and Medicaid Services (CMS) Shared Savings Program.

2. Common Assessment

A common tool to measure quality would help CMS determine which PAC services are effective and which are not. CMS finished a demonstration project for common assessment in 2011 and concluded that implementing it would be feasible.

3. New Quality Measures

MedPAC is developing new quality measures specific to post-acute care, which it believes will help compare providers across categories and could eventually tie care outcomes to Medicare payments.

4. Expanding Medicare’s Hospital Readmission Policies

Medicare currently has a the Hospital Readmission Reduction Program to penalize hospitals with high readmission rates, created as part of the Affordable Care Act (ACA) health reform law. MedPAC recommends expanding the program to include post-acute providers, which would hold them jointly responsible with hospitals for preventing readmissions.

Learn More:

MedPAC’s reports to Congress are full of additional recommendations for Medicare payments to other providers. You can read the full report here, and you can check the MedPAC section of this blog for more posts on the subject.