How Post-acute Care Can Improve Hospital Financial Performance

To answer these questions, the hospital should first assess the size of the post-acute opportunity. This is accomplished by examining both the overall demographics of the community and the actual size of the hospital's acute-care patient population. Using program-specific admission criteria for each post-acute service line, the hospital must determine how many patients should be able to transition to post-acute care from its own facility, as well as the larger community. Because of the high correlation between patient age and post-acute utilization, those providers with a relatively high proportion of acute-care Medicare patients, as well as those located within older communities, will likely have the greatest potential for post-acute admissions. For example, it has been estimated that between 40% and 50% of all Medicare acute-care patients would likely be appropriate for some level of post-acute care, although the actual number of referrals to post-acute programs varies dramatically by provider and by community.

For those hospitals with post-acute services already in place, any sizeable gaps between actual and potential post-acute referrals must be reconciled. Issues that might negatively impact referrals, such as physician practice patterns or case management practices, must be identified and addressed if necessary.

Regardless of whether the hospital currently has post-acute services in place or not, it should develop a competitive profile that details information, such as the number and types of providers in the community, the services offered, and the source of each provider's referrals (to the extent available). For hospitals with existing post-acute services, this review is extremely important in assessing whether there is any referral "leakage" to unrelated providers in the community, and if so, the reason for this phenomenon. For those examining opportunities for new post-acute development, the competitive review is critical in identifying service gaps.

Finally, a financial assessment should be conducted to quantify the impact of pursing new or expanded post-acute opportunities relative to other priorities of the organization. For many health systems, the answer will be to implement a post-acute strategy to capture this business internally rather than let it transition to other providers. For other health systems, however, the better answer may be partnering with other post-acute providers to offer this care. Either way, an informed decision and a clear direction is critical in these uncertain financial times.

For many years, post-acute programs have taken a back seat to the more high profile acute-care service lines like cardiology, oncology, and orthopedics. While post-acute programs have always been one of the most effective ways to reduce acute-care length of stay (resulting in increased acute-care margins on DRG payments), the overall margins for these programs were often too small for many health systems to worry about. But now, with many of the acute services generating negative margins, the time may have come for hospitals to reassess their previous notions regarding their post-acute business. Post-acute programs may not be a panacea for all financially struggling systems, but the long-term demand for these services and the current financial returns suggest that this may be a book of business many health systems want to pursue sooner rather than later.