Study Finds Post-Acute Care Reforms Could Extend Medicare, Save $100 Billion

The Medicare program could save as much as $100 billion over the next 10 years and the life of the Part A trust fund could be extended by two-and-a-half years, if post-discharge patients were served in a more clinically appropriate, post-acute care setting, according to a study released Oct. 10 by a consulting group.

Budget experts estimate that the Medicare trust fund will become insolvent by 2024. Reforms to the health care system are needed to “bend the cost curve” and extend the life of the trust fund. The analysis examined how changes to the way post-acute care is delivered to Medicare beneficiaries could improve both efficiency and quality of care, and thus extend the solvency of Medicare.

The analysis concluded the Clinically Appropriate and Cost-Effective Placement (CACEP) research project, which was conducted by consulting group Dobson DaVanzo and Associates on behalf of the Alliance for Home Health Quality and Innovation. The final report built upon a series of four working papers assessing the volume, payments, patient pathways, and readmissions of different post-acute care episodes.

The report said “innovative approaches to the use of post-acute care that pursue clinically appropriate and cost-effective placement could be key to improving patient care at a lower cost to the Medicare program.”

The first two papers found that Medicare expenditures vary across post-acute care settings, and home health care is the most cost effective (66 HCDR, 4/6/12). The third paper found that patients who receive home health care as the first care setting following hospital discharge tended to have lower overall Medicare episode payments (99 HCDR, 5/23/12). The fourth paper concluded that pre-admission treatment in a home health setting may reduce unplanned readmission.

The final report noted there is considerable overlap of patients across post-acute care settings. Patients with similar clinical and demographic characteristics are receiving care in settings with different relative Medicare payments. As a result, the study said, Medicare savings can be achieved by understanding the patterns with which patients receive care (patient pathways), identifying ways to avoid unplanned readmissions, and placing patients in the most clinically appropriate and cost-effective setting.

Specific Savings

According to the report, changes to the health care delivery system and payment reform will depend on clinically appropriate placement of patients upon hospital discharge and improvements to managing continuity of care as patients move from facility-based care settings to their homes.

The health care reform law authorized various demonstrations and programs aimed at reforming the delivery system, including a bundled payment initiative, which is testing various approaches that alter payment for health care services, including post-acute care services.

According to the study, shifting of patient care settings alone, without restructuring or re-engineering the way care is provided, would yield savings of $34.7 billion over 10 years. Adding an explicit policy to reduce Medicare fee-for-service post-discharge spending by 5.3 percent would result in savings of $70 billion over 10 years, the report found. Further, the report said, adding a policy to reduce post-discharge spending by 7.5 percent would yield Medicare savings of $100 billion over 10 years.

The report did not present any specific policy solutions; it just presented data meant to drive the restructuring of post-acute care through “innovative payment models.”
“Payment and health care delivery system reform must be carefully designed and implemented to balance provider risk and opportunities with beneficiary protections and safeguards,” the report concluded. “There is evidence in literature suggesting that we currently have the tools needed to test full implementation of various payment and delivery reform methodologies. Innovative approaches to the use of post-acute care that pursue clinically appropriate and cost-effective placement could be key to improving patient care at a lower cost to the Medicare program.”