Medicare Post-Acute Care: Quality Measurement Final Report. II. BACKGROUND


Post-acute care services represent an increasingly important part of the health services used by Medicare beneficiaries. While there is no standardized definition of Medicare post-acute care, for purposes of this report these services are defined as post-hospital services received from a skilled nursing facility (SNF), home health agency (HHA), and/or rehabilitation hospital/unit -- inpatient rehabilitation facilities (IRFs). Medicare expenditures for post-acute care services have increased dramatically, consuming an increasing share of total Medicare expenditures. In response to that trend, legislation was enacted to reduce the amount Medicare pays for post-acute care and change the ways the program pays for these services. These significant changes in payment policy and reductions in amounts Medicare will pay for post-acute care services could have a significant impact on access to and quality of care. There are no studies comparing the outcomes of post-acute care following implementation of these payment policy changes.

Implementation of the new post-acute care payment policies has retained setting specific payment methods and amounts. Such fragmentation may perpetuate inappropriate financial incentives for the admission, transfer, and discharge of patients in post-acute care. It has been presumed that there is considerable overlap in the types of patients treated in and the services provided across post-acute care settings, and thus that such fragmentation in payment policies may not be rational. However, these presumptions are not based in solid evidence. Further, questions have recently been raised about how much overlap really exists in patients and services across post-acute care settings. Some have suggested that, to the extent there was overlap, it has diminished since the implementation of recent payment policy changes.

Medicare expenditures for post-acute care have consumed an increasing share of total Medicare payments. From 1986 to 1996 Medicare payments for post-acute care increased from 3% to 15% of total Medicare expenditures, while Medicare payments for hospital services declined from 61% to 49% of total Medicare payments.1 The shift in Medicare payments from inpatient hospital to post-acute care services is attributed to several factors, including: the implementation of the diagnosis related group (DRG) hospital prospective payment system (PPS) which resulted in patients being discharged “quicker sicker” from the acute setting to the post-acute arena, technological advances that permitted the delivery of more complex care in “downstream” post-acute care settings, and Medicare post-acute care coverage and payment policies.1

From 1986 to 1996, Medicare post-acute expenditures increased from $2.5 billion per year to more than $30 billion, growing roughly 25% to 35% per year. The most rapid growth in expenditures was for HHA and SNF care. Contributing to the growth in post-acute care expenditures was the increased numbers of beneficiaries using these types of care, increased utilization of ancillary services (e.g., physical, occupational, and speech therapies, drugs, ventilators, etc.) in SNFs, increased numbers of visits per HHA user, and increased numbers of all types of Medicare certified post-acute care providers.

Approximately 25% of Medicare beneficiaries discharged from a hospital receive post-hospital services in HHAs, SNFs, and/or rehabilitation hospitals/units.2 Approximately 17% of those beneficiaries admitted to a post-acute care setting receive post-acute care from more than one post-acute provider. For some conditions, the proportion is much higher. For example, 65% of Medicare beneficiaries hospitalized for stroke receive post-acute care, and almost 20% of stroke patients receive care from multiple post-acute care providers.