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A study assessing the outcomes of patients who were treated in inpatient rehabilitation facilities (IRFs) with clinically and demographically similar patients who received their post-acute rehabilitation in skilled nursing facilities (SNFs) finds that IRFs provide better care to their patients over a number of outcome measures – IRF patients live longer, spend more days at home and fewer days in health care institutions, have fewer emergency room visits and, for patients with some diagnoses, fewer rehospitalizations.[1]  The study has significant implications for site-neutral payment proposals and bundling demonstrations, both of which are likely to shift patients to SNFs.

The Study

The ARA Research Institute, an affiliate of the American Medical Rehabilitation Providers Association, commissioned Dobson DaVanzo & Associates, LLC to investigate the impact of the revised classification criterion for IRFs, introduced in 2004, which required that 60% of patients in IRFs be treated for one of 13 conditions.[2]  Beginning with a 20% sample of patients treated in SNFs and 100% of patients treated in IRFs between 2005 through 2009, the study looked at a subset of patients whose conditions were the same in both settings.  With 100,491 matched pairs of patients with the same conditions (representing 89.6% of IRF patients and 19.6% of SNF patients in the study period), Dobson DaVanzo conducted two analyses.

  • The cross-sectional analysis looked at the distribution of clinical conditions of patients treated in the two settings following implementation of the 60% rule.  In 2005, the three largest clinical categories of patients treated in IRFs (lower extremity joint replacement (hip/knee replacement), stroke, and hip fracture) represented 60.4% of IRF admissions; by 2009, the percentage had declined to 52.4%.  (The proportion continued to decline to 45.9% of admissions in 2010 and 40.8% of admissions in 2013).  Between 2005 and 2009, the percentage of patients treated at IRFs for stroke, major medical complexity, neurological disorders, and brain injury each increased. 

The biggest change was in patients with hip/knee replacement.  IRF admissions for these patients declined from 25.4% of all IRF admissions in 2005 to 14.5% of IRF admissions in 2009.

  • The longitudinal analysis looked retrospectively over a two-year period at patients' clinical outcomes and total Medicare payments made on patients' behalf (excluding payments for physician services and durable medical equipment).  The researchers found that IRF patients had better clinical outcomes than patients treated in SNFs on five of six measures.  For the sixth measure, hospital readmissions, IRF patients had fewer hospital readmissions than SNF patients for five of the 13 conditions (amputation, brain injury, hip fracture, major medical complexity, and pain syndrome).

Dobson DaVanzo reported data for all conditions and, separately, for each of the 13 conditions studied.  The information presented here reports the all-conditions data with examples of condition-specific data.

Clinical Outcomes

Issue

IRF Patients

SNF Residents

Average length of stay in post-acute care for all clinical categories

12.4 days

26.4 days

Risk of mortality in two years for all clinical categories

24.3%

32.3%

  E.g., Risk of mortality in two years, hip fracture

25.4%

33.7%

  E.g., Risk of mortality in two years, hip/knee replacement

5.2%

5.9%

  E.g., Risk of mortality in two years, stroke patients

34.2%

48.4%

Additional days of life for all clinical categories

621.0 days (20.7 months)

569.1 days (18.9 months)

  E.g., additional days of life, hip fracture

622.4 days

567.3 days

  E.g., Additional days of life, hip/knee replacement

712.2 days

708.3 days

  E.g., Additional days of life, stroke

572.2 days

475.5 days

Ability to remain home without facility-based care for all clinical categories

582.3 days

530.8 days

  E.g., Ability to remain home without facility based care, hip fracture

581.2 days

528.4 days

  E.g., Ability to remain home without facility-based care, hip/knee replacement

698.0 days

693.4 days

  E.g., Ability to remain home without facility-based care, stroke

518.4 days

426.4 days

Emergency room visits for all clinical categories

642.7 ER visits/1000 patients/year

688.2 ER visits/1000 patients/year

  E.g., Emergency room visits, hip fracture

576.5 ER visits/1000 patients/year

613.3 ER visits/100 patients/year

  E.g., Emergency room visits, hip/knee replacement

413.1 ER visits/1000 patients/year

432.3 ER visits/1000 patients/year

  E.g., Emergency room visits, stroke

785.9 ER visits/1000 patients/year

823.0 ER visits/1000 patients/year

Hospital readmissions for all conditions

957.7 readmissions/1000 patients/year

1,008.1 readmissions/1000 patients/year

  E.g., Hospital readmissions, hip fracture

838.1 readmissions/1000 patients/year

891.1 readmissions/1000 patients/year

  E.g., Hospital readmissions, hip/knee replacements

499.9 readmissions/1000 patients/year

505.2 readmissions/1000 patients/year

  E.g., Hospital readmissions, Stroke

1123.1 readmissions/1000 patients/year

1227.1 readmissions/1000 patients/year

Source: Dobson DaVanzo & Associates, Assessment of Patient Outcomes of Rehabilitative Care Provided in Inpatient Rehabilitation Facilities (IRFs) and After Discharge, pages 28-38, Exhibits 4:1-4:10.

Medicare Costs

In addition to finding that patients in IRFs, had better clinical outcomes, Dobson DaVanzo analyzed the costs of care, both during the initial inpatient stay in either an IRF or SNF and for two subsequent years.  The researchers found both that care in an IRF is more expensive than care in a SNF and that patients treated in IRFs had slightly higher overall medical costs over the two-year period.

The analysis did not consider Medicare costs for physicians or durable medical equipment over the two-year period.  Nor did it consider the costs of nursing home care paid by Medicaid for patients treated in IRFs or SNFs.  These Medicaid costs could be considerable.

An early study looked at the treatment of patients with hip fractures before and after implementation of the prospective payment system (PPS) for hospitals, based on diagnosis related groups (DRGs).[3]  It found that before the DRG system, patients with hip fractures received rehabilitation in the hospital and then went home.  Following the DRG system, hospital lengths of stay declined from 22 days to 13 days and the percentage of patients discharged to SNFs increased from 38% to 60%.  Although the expectation had been that patients would get the same rehabilitation services in SNFs that they had received in acute care hospitals, but at lower cost, that expectation did not prove true.  After PPS, the researchers found that, for various reasons, "rehabilitation therapy within the nursing homes was less effective than inpatient therapy before PPS."  Moreover, instead of getting therapy and returning home, patients were more likely to be in the nursing home a full year after their hip fracture; a 200% increase in the rate of nursing home residence was reported by the study after PPS was implemented. The researchers described this finding as both "alarming" and their most important finding.  The costs of care shifted from inpatient hospital care paid by Medicare to long-term care paid by Medicaid. 

Medicare Costs

Issue

IRFs

SNFs

Average Medicare payment for initial stay for all conditions

$14,836

$ 8,861

  E.g., Average Medicare payment for initial stay, hip fracture

$15,183

$11,019

  E.g., Average Medicare payment for initial stay, hip/knee replacement

$10,716

$  6,506

  E.g., Average Medicare payment for initial stay, stroke

$19,149

$10,482

Average Medicare payment per-member-per-month (PMPM) for post-hospital rehabilitation period for all conditions

$1,815

$1,736

  E.g., Average Medicare payment PMPM for post-hospital rehabilitation period for hip fracture

$1,679

$1,598

  E.g., Average Medicare payment PMPM for post-hospital rehabilitation period, hip/knee replacement

$887

$844

  E.g., Average Medicare payment PMPM for post-hospital rehabilitation period for stroke

$2,227

$2,162

Average Medicare payment per day for all conditions (over two-year period)

$82.65

$70.06

  E.g., Average Medicare payment per day (over two-year period), hip fracture

$78.17

$68.40

  E.g, Average Medicare payment per day (over two-year period), hip/knee replacement

$43.64

$35.55

  E.g., Average Medicare payment per day (over two-year period), stroke

$104.41

$88.08

Source: Dobson DaVanzo & Associates, Assessment of Patient Outcomes of Rehabilitative Care Provided in Inpatient Rehabilitation Facilities (IRFs) and After Discharge, pages 38-42, Exhibits 4:11-4:14.

Site-Neutral Payments

The Medicare Payment Advisory Commission (MedPAC) supports the use of site-neutral payments and writes in its June 2014 Report to Congress: "Site-neutral payments stem from the Commission's position that the program should not pay more for care in one setting than in another if the care can be safely and efficiently (that is, at low cost and with high quality) provided in a lower cost setting."[4]  In the Center's view, "safely and efficiently" are not the same as "low cost and with high quality."  While "efficiently" may be equated with "low cost," "safely" and "high quality" are different from each other.  A post-acute setting could provide "safe" care, but the care might not be of high quality.

In its June 2014 report, MedPAC analyzed implementation of site-neutral payments for three categories of patients that account for approximately one-third of IRF patients and many SNF patients – major joint replacement, stroke, and hip and femur procedures (including hip fractures) – and found more variation among stroke patients.[5]  MedPAC compared four outcomes for IRF and SNF patients: "hospital readmission rates, changes in functional status, mortality rates, and total Medicare spending during the 30 days after discharge from the qualifying stay."[6]  The results were "mixed" – SNF patients had higher readmission rates; results were mixed for changes in function; mortality rates were higher for SNF patients in the 30-day period following discharge; and Medicare spending was higher for IRF patients.  

MedPAC recommended paying IRFs the same rates as SNFs, with waivers possible for some IRF requirements.  Reducing IRF payments to the same levels as SNFs could decrease Medicare payments to IRFs by $300 million (4%).  MedPAC also reported that beneficiaries treated in SNFs rather than in IRFs could have increased cost-sharing.

Post-Acute Bundling Demonstrations

Section 3023 of the Affordable Care Act, 42 U.S.C. §1395cc-4 calls for a National Pilot Program on Payment Bundling to pay for an "episode of care," defined at §3023(2)(D)(i)(I)-(III) to include a hospital stay and 30 days following discharge from the hospital.  Medicare traditionally pays health care providers for the individual services they provide.  The purpose of bundling payments is to support and encourage better coordination of care among different care settings and providers.

In January 2013, the Center for Medicare and Medicaid Innovation (CMMI), the new Center at the Centers for Medicare & Medicaid Services that is responsible for the bundling demonstrations, announced the health care entities that had been selected to participate in the demonstrations.[7] 

In Model 2 (of four models), the "retrospective acute and post-acute demonstration," the episode of care begins with hospitalization and includes post-acute care.[8]  Model 2 "initiators" are acute care hospitals and physician group practices.  The demonstration waives the three-day hospital stay requirement[9] for participants; the waiver means that patients can get coverage in a SNF without having first been inpatients in the acute care hospital for at least three consecutive days, not counting the day of discharge. 

In Model 3, the "post-acute care retrospective demonstration," the episode of care is triggered by the acute care hospitalization but begins with discharge to the post-acute setting.[10] 

Both Models "involve a retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care."  Providers whose spending is below the target price can keep the savings; providers whose spending is above the target price must repay Medicare the difference between the actual expenditures and the target price.

Both Models test post-acute periods of 30, 60, or 90 days.[11]  Model 2 has 107 participants; Model 3, 43 participants.

Discussion

Based on the experiences of the Center's clients, the Center views IRFs as an important provider in the health care continuum.  IRFs should be available to Medicare patients who need, and could benefit from, intensive rehabilitation services.  Accordingly, the Center is concerned about whether site-neutral payments and the bundling demonstrations will affect the actual availability of IRFs for Medicare beneficiaries.

What is the purpose/goal of site-neutral payments?  MedPAC sees the purpose as paying the same rates to providers that provide the same services "safely and efficiently."  In the Center's view, site-neutral payments are appropriate in more narrow situations – when health care providers provide the same services to the same kinds of patients and achieve the same results.  The Dobson DaVanzo study shows that IRFs and SNFs treat some of the same patients, but they provide different services and achieve different health outcomes for their patients.  The Center believes that site-neutral payments could spell the end of IRFs as an option for Medicare beneficiaries.

The bundling demonstrations require that beneficiaries have freedom of choice in selecting their post-acute provider, if that provider is willing to admit them.  However, the Center questions whether freedom of choice is more theoretical than actual.  If acute-care hospitals and physician practice groups are at financial risk in the demonstrations, will they steer patients to the post-acute provider of their choice, which is likely to be the lower-cost SNF alternative?  How much freedom of choice will patients have in actual practice?  How much freedom of choice do they have now?  Further, will shared-savings in both models result in less therapy in both care-settings?

In Model 3, in addition to concerns about appropriate therapy, the Center is concerned that, because post-acute care providers "control the bundle," they may refuse to send a patient to the more costly hospital, even when hospitalization is medically necessary, in order to keep the total actual expenditures lower than the target price for that patient's episode of care.

Conclusion

The Dobson DaVanzo analysis shows that clinical outcomes for IRF patients are considerably better than clinical outcomes for SNF patients, but costs are higher for IRF patients than for SNF patients.  Site-neutral payments would likely reduce payments to IRFs, reduce the availability of IRFs for Medicare patients, and increase cost-sharing for Medicare patients.  Post-acute bundling would also likely shift Medicare patients from IRFs to SNFs.  Do Models 2 and 3 put Medicare patients at risk of less access to therapy and poorer results?

The Center for Medicare Advocacy wants to ensure that IRFs are available to Medicare patients who need, and could benefit from, their services.  Site-neutral payments and the bundling demonstrations appear to undermine the availability of IRFs for Medicare patients who need post-acute care.


[1] See Dobson DaVanzo & Associates, Assessment of Patient Outcomes of Rehabilitative Care Provided in Inpatient Rehabilitation Facilities (IRFs) and After Discharge (July 2014), http://www.amrpa.org/newsroom/Dobson%20DaVanzo%20Final%20Report%20-%20Patient%20Outcomes%20of%20IRF%20v%20%20SNF%20-%207%2010%2014%20redated.pdf.
[2] 319(21):1392-1397 (Nov. 24, 1988).
[4] MedPAC, Report to the Congress: Medicare and the Health Care Delivery Systems (June 2014), http://medpac.gov/chapters/Jun14_Ch06.pdf
[5] MedPAC, Report to the Congress: Medicare and the Health Care Delivery Systems (June 2014), http://medpac.gov/chapters/Jun14_Ch06.pdf
[6] Id. 110.
[7] CMS, "Bundled Payments for Care Improvement (BPCI) Initiative: General Information," http://innovation.cms.gov/initiatives/bundled-payments/
[8] CMS, "BPCI Model 2: Retrospective Acute and Post Acute Episode," http://innovation.cms.gov/initiatives/BPCI-Model-2/index.html.
[9] 42 U.S.C. §1395x(i).
[10] CMS, "BPCI Model 3: Retrospective Post Acute Care Only," http://innovation.cms.gov/initiatives/BPCI-Model-3/index.html
[11] CMS, "Bundled Payments for Care Improvement (BPCI) Initiative: General Information," http://innovation.cms.gov/initiatives/bundled-payments/.

July 31, 2014 – Toby S. Edelman

 

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