Scott Regenbogen

Dr. Regenbogen is a Co-Director of MVC and an Assistant Professor of Surgery at the University of Michigan.

MVC hospitals confronting the CMS Episode Payment Models, BCBSM Hospital P4P metrics, and other episode-based measures ask themselves (and us): “Where can we find opportunities to reduce episode spending?” A publication in last month’s Health Affairs authored by several members of the MVC Leadership, may help. This study suggests that hospitals can most effectively address post-discharge ancillary care costs by examining how frequently they choose to send their patients to inpatient rehabilitation care facilities after discharge.

In the past, we have found the greatest point of leverage in overall episode spending involves post-acute care services. An often cited paper from our previous MVC Director and current Associate for Strategy, David Miller, found that post-acute care was responsible for the greatest share of variation in episode payments after inpatient surgery, ranging from 31% for coronary bypass (CABG) to 85% for hip replacement (THR). However, it is less obvious how a hospital would set about addressing their patients’ post-acute care spending if they found themselves to be high utilizers.

This new study — authored by MVC Associate Director Lena Chen, Economist Edward Norton, and Co-Director Scott Regenbogen — asks a simple question: do high post-acute care expenditures result from (i) the decision to use any post-acute care; (ii) the choice of what kind of post-acute care to use; or (iii) the quantity of services used once enrolled in post-acute care.

To answer these questions, the study identified hospitals nationwide in the highest and lowest quintiles of post-acute care spending for fee-for-service Medicare beneficiaries undergoing colectomy, CABG, and THR. It then performed both price standardization and risk-adjustment, as we do in MVC data, to allow uniform comparisons of the spending that would be expected if all hospitals treated clinically similar patients under similar regional price and wage constraints. Next, it evaluated the degree to which remaining differences in utilization and spending could be explained by the choice of setting (home without services, home with visiting nursing or in-home rehabilitation, inpatient skilled nursing, inpatient rehabilitation etc.) versus the intensity of care (the quantity of services billed within the chosen modality of care). This analysis used the Oaxaca-Blinder decompensation method to identify the separate contributions of factors within and between the care settings.

The choice to use any inpatient rehabilitation explained the largest share of all variation in adjusted post-acute care spending, ranging from 26% for colectomy to 52% for CABG. The intensity of use of inpatient rehabilitation, in contrast, explained 3% or less of differences. Choice of skilled nursing was responsible for 16-25% of variation, and choice of home health accounted for another 8-13%. The only site and condition for which the intensity of care made a meaningful contribution was in skilled nursing facilities after colectomy, where the quantity of billed services contributed to 20% of variation.

These findings suggest that hospitals seeking to reduce their post-acute care costs after major inpatient surgery should first examine the proportion of their patients that enter the most expensive types of care after discharge. In general, they need worry less about the quantity of services that get used once the patients arrive there.

The research was supported by the National Institute of Aging (Grant No. P01AG019783-0751). Dr. Chen was also supported by the Agency for Healthcare Research and Quality (Grant No. K08HS020671).

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