Update Medicare settings

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Medicare settings - Slide Update

With a growing aging population and the marked uptick in the number of Medicare recipients with chronic conditions like obesity and type 2 diabetes, spending at high cost post-acute settings has increased significantly. A 2017 report from Deloitte reports that twenty-two percent, or nearly eight million individuals, used post-acute care facilities like skilled nursing facilities, long-term acute care hospitals, and home health agencies upon their release from the hospital. That same study shows that Medicare spends nearly $60B annually, or twelve percent of its overall expenditures on post-acute care.

A note on the data: The 2012 Dobson DaVanzo Placement report provided as the source for the original data used data from 2007-2009 as the basis for its calculations. Similar studies published in 2017, such as the Deloitte study, use data from the years 2012-2013. While 2012-2013 data is not as recent as we would like to present, it is the most current data that is publicly available.


Deloitte published a study in 2017, based on 2013 data, that found that 50% of all post-acute costs are associated with home health agencies (HHA), 41% with skilled nursing facilities (SNF), 7% with inpatient rehabilitation facilities (IRF) and 2% with long-term acute care hospitals (LTACH). That same report found that 12% of annual Medicare expenditures are spent on post-acute care and that one-fifth of Medicare patients receive such care after a hospital discharge.

Further research into the source of this statistical breakdown presented by Deloitte shows that nearly 41.7% of Medicare recipients were admitted to a post-acute care (PAC) facility after their initial hospital discharge, as compared to 11.7% of private insurance holders, 8.1% of Medicaid recipients, and just 4.8% of the uninsured. Of that 41.7% of Medicare recipients admitted to a PAC, 2.8% were sent to SNFs after a hospitalization in 2013, 0.9% to LCTHs, 19.6% to IRFs and 18.4% to HHAs.

The updated slide reflecting the most current proportion of Medicare patients place in avoidably high-cost setting can be found here. The spreadsheet used to create the chart can be found here.

There are regional differences in PAC admissions as well, with 32.8% of all discharged patients (i.e. Medicare, private insurance, uninsured, etc.) in the New England Census region being sent to a PAC, as compared to just 17.8% of those in the Mountain or Pacific regions.

As noted above, due in part to the aging US population and the prevalence of chronic conditions, "between 2001 and 2013, Medicare spending on PAC, both facility-based and in-home, doubled from $29 billion to $59 billion per year and has grown faster than most other major Medicare spending categories." 2013 testimony before the House Ways and Means committee supports this claim, and goes on to say that "per capita spending has grown by 90%" since the year 2000.


Deloitte found that there were differences in the types of post-acute care facilities to which patients were discharged, based on whether or not the patient was in a Medicare Advantage (MA) plan or was a fee-for-service (FFS) Medicare recipient.

Looking at discharge data for patients hospitalized for stroke, heart failure or joint replacement issues, they found that MA enrollees were "less likely to be admitted to IRFs and have shorter stays at SNFs compared with fee-for-service (FFS) Medicare enrollees." For example, they found that MA patients discharged from the hospital after a joint replacement procedure were 2% more likely to be sent to a SNF, "but stay 3.2 fewer days than FFS Medicare patients, on average."

Deloitte concluded that "FFS Medicare could save $1,455 per joint replacement, $2,397 per stroke, and $1,143 per heart failure episode if it had the same post-acute care use and readmissions rates as MA."


Deloitte surveyed 36 healthcare executives from 27 different organizations for their study. They found that the post-acute care industry is highly fragmented, leading to "nearly three-quarters of all Medicare spending variation [being] traced to post-acute care." Variation includes things like duration of stay and quality of care. It also illustrates a lack of standardization around patient placement, due in part to physician education. One healthcare executive told Deloitte that "the average physician probably cannot tell you with a good deal of accuracy the differences between IRF, SNF, assisted living, home health, or hospice."

These issues around variation are something the industry recognizes as a critical area to address. One PAC executive surveyed said, "What is accepted in post-acute care would be considered catastrophic if that level of variability existed in hospitals or physician offices." One step is a direct result of the $60B bill Medicare received from PAC costs in 2013. The Improving Medicare Post-Acute Care Transformation Act (IMPACT) was introduced in 2014 with the goal of improving transparency and care coordination across HHAs, SNFs, IRFs, and LTCHs. "Once fully implemented, it will be the ultimate validation of an integrated home-centric PAC delivery model in which an accountable organization manages the full continuum of care post discharge, redirects patients to the most appropriate site of care, and thus, enables patients that can go home to go home faster, safer, and with the right supports."

Another area the industry is addressing is readmission rates. Deloitte reports that hospital readmissions are high for patients in many post-acute care settings - some 22% of patients at skilled nursing facilities are readmitted to the hospital within 30 days of their initial discharge. Further, "patients treated at hospitals with relatively high spending on post-acute care, particularly skilled nursing facilities (SNFs), had a 5% increase in mortality risk."

The industry, according to the Deloitte report, is looking to capitalize on potential growth by focusing on value-based care, innovation and quality. One PAC executive said "This is the single best opportunity for post-acute care to elevate our status as a partner to hospitals and doctors that has ever existed. A health system executive stated "The biggest opportunity in post-acute is collaboration across the levels of care.


Looking more generically at Medicare spending, a 2017 report, which examined 2012 data, shows that 4.8% of Medicare spending was potentially preventable. Of that 4.8%, 43.9% came from "high-cost frail elderly persons...High-cost nonelderly disabled persons accounted for 14.8% of potentially preventable spending ($3421 per person) and the major complex chronic group for 11.2% ($3327 per person)." Please note that these figures are not specific to post-acute care spending, but rather reflect overall Medicare spending.

To sum it up, Medicare spending on post-acute care has skyrocketed to nearly $60B annually, as of 2013. 12% of annual Medicare expenditures are spent on post-acute care and that one-fifth of Medicare patients receive such care after a hospital discharge. As of 2013, the most recent data available, nearly 42% of Medicare recipients were admitted to a post-acute care (PAC) facility after their initial hospital discharge and of those, 84.9% were sent to SNFs after a hospitalization in 2013, 76.2% to LCTHs, 68.7% to IRFs and 64.6% to HHAs.