Multiple data sources are used to construct episodes of care, identify organizational relationships, and examine local supply variation. Episodes begin with an index hospitalization3 and continue through discharges to inpatient rehabilitation hospitals, long term acute care hospitals, skilled nursing facilities, home health agencies, and outpatient therapy services.4 Costs and use of physicians and other practitioners, hospice, and durable medical supplies during the episode are also examined. These patterns of care analyses allow us to study order of services as well as volume and relative probability of service use for different populations or beneficiaries with certain health conditions.
Measures of formal and informal relationships between hospital and post-acute providers also are constructed. Formal relationships are defined by hospital ownership of a subprovider, such as a hospital-based rehabilitation unit or skilled nursing facility. Informal relationships are defined by "co-location" factors such as independently-owned providers being physically within 250 yards of each other, in effect, creating a medical mall or campus. Proximity is important in creating access to services, particularly for someone requiring transportation services, such as an ambulance between settings. Other informal relationships are defined by the presence of a satellite facility within another provider. This satellite may be located within a hospital campus or co-located with other healthcare providers in the community besides the parent facility. We hypothesize that these physically close providers may provide benefits to the acute hospitals despite the lack of formal "ownership" relationships.
Hospitals have an incentive to discharge their cases within the average lengths of stay (ALOS) window used to set their payment rates in order to avoid losses on a particular case. Having a post-acute provider nearby allows this discharge to occur at the earliest time possible. Further, each post-acute provider has their own payment system in which the patient may be viewed as "profitable" or not. If a hospital owns the post-acute provider, they may encourage the PAC site to admit the patient if the anticipated hospital "savings" or reduced losses are greater than the anticipated PAC losses. For some cases, discharge to the PAC may be a win-win situation where the hospital limits its costs and the PAC payment rate is profitable for that patient.5