Nixing discharges to long-term care hospitals could save Medicare $4.6B, study finds
- Medicare could save about $4.6 billion with no negative effect on patients by disallowing discharges to long-term care hospitals, a new SSRN analysis finds.
- The researchers looked at the impact of patients being discharged to an LTCH on different outcomes between 1998 and 2014. The study included 3,400 local hospital markets. Markets with LTCHs tended to be larger than those without, accounting for 34% of Medicare enrollees by the end of the 16-year period.
- Per-day rates for LTCH care averaged $1,400 in 2014 versus $450 for a skilled nursing home, the alternative for about four-fifths of LTCH patients — a $33,000 increase in net Medicare spending per acute care hospital discharge, the researchers say.
According to the study, Medicare spending on post-acute care totaled $59 billion in 2014, care traditionally provided by SNFs or home health agencies. However, a regulatory carve-out for several dozen specialty hospitals gave rise to an LTCH industry with more than 400 hospitals and $5.4 billion in Medicare spending by 2014.
CMS has tried repeatedly to close the loopholes that allow LTCHs, typically large for-profit chains, to reap substantially larger Medicare payments than other post-acute care providers and to curtail growth in the segment, with little success.
Of the $5.4 billion spend on LTCHs in 2014, about 85% was incremental spending, the authors note. "This suggests that the elimination of LTCHs would reduce Medicare spending by about $4.6 billion per year, with no measurable adverse impact on patient welfare," they said.
Eliminating LTCHs, which account for just 1% of Medicare spending, "would remove 13% of the residual variance, in the absence of a behavioral response, and about 10% given the substitution to SNFs," the authors added.
Providers, payers and policy wonks are all looking for ways to rein in healthcare spending. In a report published earlier this year, low-value healthcare services — e.g., overprescribing antibiotics and ordering unnecessary tests for lower back pain — cost Washington state $282 million between July 2015 and June 2016. The Washington Health Alliance based its analysis on the national "Choosing Wisely" campaign's definition of low-value healthcare services.
According to the National Academy of Sciences, about 30% of healthcare services are wasteful, pushing up costs. This study points to LTCH services as another source of wasteful spending.
Some of the waste in LTCH spend could be eased by the general press to treat more patients in the home. Smart healthcare technologies and remote monitoring are enabling more patients to recuperate and receive care at home. A recent study in JAMA Internal Medicine found a bundled payment of acute hospital-level care in the home plus 30 days of post-acute transitional care led to better clinical outcomes and higher patient satisfaction, compared with inpatient hospital care.
CMS penalties for 30-day readmissions also have hospitals invested in keeping discharged patients from needing rehospitalization. Some health systems and companies are looking at M&A in post-acute care services, as demand for those will only increase with aging of baby boomers. Last month, Humana and private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe completed their acquisition of Kindred Healthcare, a provider of home health, hospice and community care.