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Post-Hospital Choice Can Save Medicare Billions

Published by MedPage Today
Joyce Frieden
October 10, 2012

Directing Medicare beneficiaries into the most cost-efficient setting possible after a hospital stay could save the program $35 billion to $100 billion over the next decade, the Alliance for Home Health Quality and Innovation, a home care trade association, reported Wednesday.

"This isn't a silver bullet to fix Medicare but it could make a difference," Rep. David McKinley (R-W.Va.) said at a press conference where the report was issued. "Better post-acute care leads to less frequent hospital readmissions, plain and simple."

Initial hospital visits and post-acute care account for about half of all Medicare spending, report author Al Dobson, PhD, of Dobson DaVanzo and Associates, a Vienna, Va. consulting firm, said at the press conference. "Shifting patients into more cost-effective settings ... could achieve substantial savings and extend the life of the program by 2 1/2 years."

Examining Medicare claims for a representative 5% sample of Medicare beneficiaries from 2007 to 2009, the report authors found that post-acute care settings have very different costs, with home healthcare being the lowest, followed by skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals.

And which of those healthcare "stops" patients make after discharge from the hospital can have a big effect on the cost to Medicare.

For example, a patient who goes from hospital care directly back into the community costs Medicare an average of $14,003, compared with $17,172 for the patient who goes from hospital care to home care and then into the community, or $31,839 for the patient who goes from hospital care to an inpatient rehabilitation facility to home care and then to the community.

Patients who look similar clinically may each go into a different setting after a hospital stay, Dobson said.

Hospital readmissions also increase costs for care, Dobson noted. An average hospital episode that did not include readmission cost Medicare $15,335, compared with $33,926 for an episode that included readmission to the hospital.

How much these costs can be reduced depends in part on how aggressive Congress is willing to get in seeking reductions. "Just by substituting people from higher-cost settings to lower-cost settings we might save about $35 billion," he said. "If we got more aggressive and Congress were to say, 'Let's pick up 5.3% [in savings] out of the post-acute-care sector as it relates to these episodes, we might save $70 billion. If the Congress got really aggressive and directed CMS to save 7.5%, we might save $100 billion."

Panelists at the press conference had no specific suggestions for policies that would encourage moving patients into lower-cost settings.

"Today's event is about research, not about policy prescriptions," said Douglas Holtz-Eakin, president of the American Action Forum, a conservative policy group, and former director of the Congressional Budget Office. "It's a demonstration that we can do business better."

Blanche Lincoln, a former Democratic senator from Arkansas, said that while there are no obvious solutions for bringing down costs, the report "is an excellent beginning. The most important thing is recognizing that it's got to be patient-centered."

The report writers themselves, however, did suggest some specific solutions aimed at giving providers financial incentives to choose the most cost-effective options for patients being discharged from the hospital.

"We contemplate a hybrid payment system that pays on [diagnosis-related groups] consistent with the Inpatient Prospective Payment System, but that also pays on patient demographic, clinical and, perhaps, functional status, similar to the Medicare Advantage program," the report reads. "This hybrid system might be appropriate, as payment bundles reflect fixed payments that need to be allocated across multiple providers."

See the original article here.