With U.S. health care costs escalating at rates that are deemed unsustainable, health care providers throughout the continuum of care, from physicians and hospitals to post-acute providers, are focused on defining new best practices to control costs while they maintain or improve quality of care outcomes.  Most agree that coordinating and/or integrating the acute and post-acute care delivery systems is critical to the cost control efforts.  A recent white paper examines the Medicare ecosystem—that is, the venues of care throughout which Medicare patients move for their care—and presents the strategic considerations for the primary players in this ecosystem as Medicare coordination of care efforts unfolds.

In a 2008 report, the Medicare Payment Advisory Commission noted the misincentives of the current fee-for-service payment methodology (where providers are incentivized to increase patient volume, even if through re-admission) and the importance of moving to a payment system that would provide a bundled payment to encourage the coordination of costs for each episode of care.  To illustrate the significance of the issue, the white paper shows the total cost of care per hospital discharge from 2002 to 2009.  It also examines the Medicare expenditures for acute care per acute discharge, skilled nursing per skilled nursing admission, and home health per person served.  Again, expenditures per patient increased significantly across the period from 2002 to 2009, so the white paper shows that, without a change in economic incentive, moving patients more quickly out of the hospital simply increases the Medicare dollar spent in other venues.

Under the Accountable Care Organization or bundled payment system, every service provider becomes a cost center and the buyer of services for an episode of care is the organization that controls the Medicare payment: “[e]conomic motivation will be to minimize the cost for an episode of care, irrespective of venue, for the same health outcome.”

Accomplishing the integration desired to effectively manage the costs and the margin achieved will challenge traditional paradigms of care delivery, so the white paper provides a review of the challenges that hospitals, in particular, will face as they consider how to more carefully manage the Medicare costs of care related to those they discharge.  Post-acute providers will find this exploration informative as they consider how best to partner with acute care providers.

Strategies in Capital Finance, Volume 71, Summer 2012.  Integrating Acute and Post-acute Care:  The Emerging Merging of the Sectors