Help! I’ve Fallen And I Can’t Get Up! Managing a Patient’s Total Cost of Care

Stephen Brill’s new book and follow-up to his much-quoted Time magazine article, America's Bitter Pill: Money, Politics, Back-Room Deals, and the Fight to Fix Our Broken Healthcare System  repeatedly makes the point that Obamacare doesn’t address costs or quality.  And it doesn’t.  For industry people, we know that’s not the job of the government, nor do we want it to be.  But is it the job of the health care institutions--or is it  CMS and the payers?  Or the patients?  That answer depends on whether as a hospital you are receiving bundled payments.  And at this point, almost every hospital is heading that way.

One great example of the industry chasing a partial-myth is that treating patients for chronic care outside the hospital is cheaper than the hospital costs.  True, right?  Why else would CMS focus on readmissions penalties so tightly? Or is it false---you decide.  

Whether you are a patient, a provider, or a payer trying to answer the question of what after-care looks-like, the EMR’s don’t solve a major reality of a patient’s journey through chronic illness -- even with the mega mergers of hospitals, care is rarely inside a single institution, particularly if you include nursing homes, rehab centers, physical therapy, and mental health visits--all part and parcel of the most complex and expensive health care issues.  Take a look at this chart from Medicare, showing how much total cost goes to post-acute care, versus in-hospital care for the most expensive and frequent chronic health conditions.

Gage B, Morley M, Ingber M, Smith L. Post-acute care episodes: expanded analytic file. Waltham, MA: RTI International, June 2011.

According to the New England Journal of Medicine, Medicare payments for post-acute care have grown faster than most other categories of spending. For example, total Medicare spending for patients hospitalized with myocardial infarction, congestive heart failure, or hip fracture grew by 1.5 to 2.0% annually between 1994 and 2009, while spending on post-acute care for those patients grew by 4.5 to 8.5% per year.1

If you look at cardiac care, the amount spent outside the hospital is roughly equal to the amount spent inside the hospital.  So what we have is a phenomenon like squeezing a balloon--if you cut costs inside the hospital, they are inflating elsewhere.  But why? A closer inspection of the data shows a hard truth--not much attention is paid to the type, location or expense of aftercare.

Look at the difference in post-acute care costs by type.  For patients hospitalized with congestive heart failure in 2008, Medicare paid about $2,500 in the 30 days after discharge for each patient who received home health care, as compared with $10,700 for those admitted to a SNF and $15,000 for those cared for in a rehabilitation hospital.2  That’s a six-fold difference in cost!

Up until now, the hospital wasn’t responsible for the post-acute care costs.  But now, whether under a bundled payment of full ACO model, the hospital will be.  And that’s where the failures of the EMRs become very significant.  Do you even know where your patients will be getting the care you prescribe, much less what it costs?   If your hospital had to get orders to a nursing care facility or home health care group, how would you do it?  How would you get the reports back?  How would you assess whether or not the patient showed up and what it cost?  Of course, you can find out six months later from Medicare or your payer, but the money is already spent.

If the money-savings isn’t enough to grab your attention, the new regulatory reporting will, whether hospitals want to or not.  In my next blog, I’ll talk about how new quality measures are upping the ante on care follow-up and reporting, and why most hospitals are struggling.

1  Post-Acute Care — The Next Frontier for Controlling Medicare Spending  Robert Mechanic, M.B.A. N Engl J Med 2014; 370:692-694February 20, 2014DOI: 10.1056/NEJMp1315607

2  Gage B, Morley M, Ingber M, Smith L. Post-acute care episodes: expanded analytic file. Waltham, MA: RTI International, June 2011