Performance Improvement 1997. Subacute Care: Policy Synthesis and Market Area Analysis



This investigation examined policy-relevant issues pertaining to the development of more effective and efficient health care delivery systems. The evaluation report provides an overview of and historical perspective on subacute care, which generally refers to skilled care for patients with complex needs outside of the acute care, or hospital, setting. In addition to describing the current state of the art in subacute care and how it varies across selected market areas, the evaluation examines the evidence about its cost and effectiveness. Implications of the study's findings are discussed, and key policy issues related to the future of subacute care are presented. The study concludes that the emerging concept of subacute care holds promise in terms of better care and lower cost, but that it also poses many challenges for the public and private sectors.


This study was initiated by ASPE to examine policy-relevant issues pertaining to the development of more effective and efficient health care delivery systems and involving substantial public and private expenditures. These issues encompass the definition of subacute care; variations in subacute care patients, providers, and settings; incentives and barriers to the growth of subacute care; and the current and potential size of the market. The primary purpose of the study was to provide useful information to both the public and the Department, including a synthesis of subacute care research, practices, and trends and an assessment of public policies related to subacute care. The way in which the term "subacute care" has evolved and the extent to which the ideal vision is currently implemented in practice are key subjects of the study.


Public spending for post-acute care services increased in the past decade from $3.4 billion to over $12.1 billion, an average annual growth rate of nearly 25 percent. In contrast, Medicare spending for acute care services grew by only 6 percent per year during the same period. If the current system is unchanged, Medicare expenditures for post-acute care and acute care are expected to rise even more rapidly as the number and proportion of the older adult population increases. Escalating costs and shifting demographics have prompted some providers to advance the concept of "subacute care" as a cost-effective alternative to inpatient acute hospital care. Proponents believe that subacute care has the potential to generate savings and improve patient outcomes.

At the time of this study, there were many definitions of subacute care. Historically, "subacute" described care provided for hospitalized patients who did not meet established criteria for a medically necessary acute stay. Currently, the term refers almost exclusively to patients treated somewhere other than in acute-care beds. The concept now focuses on shorter stays that result in improved rehabilitation for lower cost, using specific procedures designed to achieve better outcomes for patients whose service needs fall somewhere between those traditionally provided by acute care hospitals and nursing facilities.

Little reliable information is available about the likely impact of subacute care on costs, quality, and access. This lack of data may be related both to differing definitions of "subacute care" and to the recent and rapid expansion of the industry.


Initiated in August 1994, this study had several methodologies: a comprehensive literature search and review of published and unpublished documents; the establishment of an advisory group comprising public- and private-sector experts; interviews conducted with additional national experts from a variety of fields and settings; site visits to 19 institutional providers in four market areas (Los Angeles, Miami, Boston, and Columbus, Ohio); interviews with seven home health care providers; telephone interviews with eight home care firms; and a series of stakeholder interviews.


The study team concluded that insight into the different ways in which "subacute care" is defined is critical to understanding the subacute care phenomenon. The term commonly refers to skilled care for patients with complex needs that some nursing facilities, home care providers, and others have been providing for years under a variety of names. There is, in addition, a growing movement to create a new type of subacute care. The core elements of this idealized, prototypical form of subacute care include a program organized around particular disease categories, specific interventions, or homogeneous patient characteristics; a focus on achieving measurable outcomes in a more efficient and lower cost manner; special resources, such as certain physical plant characteristics and more and better trained staff; and a set of techniquesþfor example, the use of interdisciplinary teams, case managers, care maps, or critical pathway protocols; evaluation of outcomes; and an emphasis on continuous quality improvement.

Estimates of the number of days of subacute care provided each year in this country range from 1.2 million to 8.1 million. It was not possible to develop a reliable estimate of the current amount of subacute care provided. Distinguishing characteristics of subacute care are not captured in any large national data base. In addition, the study team encountered difficulties in identifying and comparing subacute care providers, in finding subacute care providers in reportedly better developed markets, and in obtaining data on subacute patients.

Factors shaping the development of subacute care nationally include the growth of managed care; efforts of managed care providers to find more cost-effective services; the implementation of new Medicare payment policies applicable to acute and post-acute care providers; changes in patient preferences, such as a desire for a homelike environment for patients with minimal nursing needs; and the growth of publicly owned, for-profit, post-acute care companies. Industry growth is also being driven by facility-based subacute care providersþskilled nursing facilities, freestanding and hospital-based nursing facilities, rehabilitation hospitals, distinct-part rehabilitation units, and long-term hospitals. The establishment of minimum standards and broadly defined quality guidelines by the Joint Commission on Accreditation of Health Care Organizations and the Rehabilitation Accreditation Commission has also influenced the subacute care industry.

The study team found that home infusion therapy and full-service home health agencies were providing a product with many of the elements of the prototypical subacute care facility. In response to the growing potential for substituting home health care for facility-based subacute care, many interviewees expressed concern about the quality of care, staffing qualifications, the role of managed care, access issues for lower-income patients, the perception of a "no-care zone" for patients with lower acuity, and the Medicare reimbursement policy for home infusion therapy.

Little evidence was discovered to support the premise that shifting patients earlier from hospitals to subacute care will save money. It was noted that a national study of potential subacute care savings for Medicare was based on several questionable assumptions. There are only a few empirical studies on quality in subacute care facilities; these have generally found poorer outcomes for patients in skilled nursing facilities than for those in rehabilitation hospitals. The four available studies comparing functional status outcomes for rehabilitation patients in hospitals and skilled nursing facilities involved a limited number of facilities; none was nationally representative.

In conclusion, the study team determined that the emerging concept of subacute care is appealing because of the new attention it has focused on some types of patients and the programs envisioned in the ideal. While site visits identified some subacute care providers that are successfully applying elements of the concept, many other services labeled "subacute care" fell short of the ideal. Despite aggressive marketing, the study team found that much that is called "subacute care" is little more than a new name for care provided to higher acuity, medically complex patients or to those requiring more intensive therapies. The idealized approach to subacute care promises similar or better care for lower cost but poses major challenges to both the public and private sectors.

Use of Results

Significant proposed legislative changes to Medicare and Medicaid have heightened the need for accurate and reliable information about subacute care, including a rigorous examination of the potential savings. This kind of information can assist Federal and State Government policymakers in determining their role in the evolution of subacute care and in understanding the implications of their actions on public and private expenditures, quality of care, patient access, and provider equity. This study underscores the importance of finding replicable technologies for producing better value, not just cheaper care, and of developing appropriate payment policies that achieve both savings and value.

Agency sponsor:

Office of Disability, Aging, and Long-Term Care Policy

Federal contact:

Jennie Harvell
PIC ID: 5951

Performer organization:

The Lewin Group, Fairfax, VA