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Medicare Study: Inpatient Setting More Cost-Effective than SNFs

By Christopher Cheney  
   July 11, 2017

For emergency-service patients, Medicare data shows that spending on care in the hospital-inpatient setting is relatively more cost-effective than spending on care in skilled nursing facilities.

For elderly patients who experience emergency medical episodes, hospitals that spend more money on inpatient care relative to post-acute care have lower mortality rates, research published in the Journal of Health Economics shows.

The study, "Uncovering Waste in U.S. Healthcare: Evidence from Ambulance Referral Patterns," examined average 90-day spending on more than 1.5 million Medicare patients over age 65. The research features two key findings:

  • Average 90-day spending was nearly $27,500 per patient, with every increase in spending of $8,500 resulting in a 2% reduction in mortality risk for the year following an emergency medical episode.
  • Patients treated at hospitals with relatively high spending on post-acute care, particularly skilled nursing facilities (SNFs), had a 5% increase in mortality risk.

"Patients who go to hospitals that rely more on skilled nursing facilities after discharge, as opposed to getting them healthy enough to return home, are substantially less likely to survive over the following year," Joseph J. Doyle Jr., PhD, a professor at the Massachusetts Institute of Technology and corresponding author the study, told MIT News this week.

The research is one of the best attempts so far to pinpoint wasteful U.S. healthcare spending, Doyle and his coauthors wrote. "Patients assigned to hospitals with high levels of inpatient spending are more likely to survive to one year, while high levels of outpatient spending result in lower survival. In particular, we discovered that downstream spending at skilled nursing facilities is a strong predictor of mortality."

MIT Professor Jonathan Gruber, PhD, and Vanderbilt University Assistant Professor John Graves, PhD, coauthored the study.

The researchers conclude that SNF utilization following treatment at an acute-care hospital should be added to the quality measures that the Centers for Medicare & Medicaid Services (CMS) use to base medical-service reimbursement on the quality of care.

"Our results highlight SNF admissions as a quality measure to complement the commonly used measure of hospital readmissions and suggest that in the search for waste in the U.S. healthcare, post-acute SNF care is a prime candidate," Doyle and his coauthors wrote.

"In a similar spirit to widely used readmission measures, SNF admission is expensive and we find it is a strong predictor of mortality. This suggests that SNF admission, or some combination of SNF and hospital admission, creates a stronger quality measure."

The research also has an intertwined pair of implications for bundled-payment reimbursement contracts involving acute-care hospitals, the researchers wrote:

  • There is a weak correlation between overall 90-day spending and patient outcomes, which implies bundled-payment contracts have the potential to reduce healthcare spending relative to fee-for-service contracts.
  • However, Medicare claims data indicates that inpatient spending is cost-effective, so bundled-payment contracts should be crafted in ways that do not penalize high-performing hospitals.

Doyle and his colleagues are among the research pioneers using Medicare ambulance-service claims data to compare spending and other performance measures at hospitals. A study he coauthored in 2015 that used ambulance-service claims data to examine the intensity of emergency-care treatment also found high-cost hospitals generate better patient outcomes.

Linking ambulance-service claims data with Medicare inpatient and outpatient claims data creates a powerful statistical tool, Doyle and the coauthors of this month's Journal of Health Economics study wrote. "Each community provides its own experiment, with ambulance companies delivering patients to hospitals with different treatment patterns. This enables us to compare patients assigned to hospitals with different combinations of treatment intensities."

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.

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