If you are a post-acute/long-term care provider still sitting on the sidelines waiting for a clearer understanding of how Healthcare Reform is going to impact your organization’s future, well then all I can say is, “Good luck with that – let me know how it works out for you.”

In an article published this past weekend (Medicare Seeks to Curb Spending On Post-Hospital Care), Kaiser Health News’s Jordan Rau reported on the wide variability in Medicare spending on post-hospital care across the county – and the attention that it is getting from CMS. Attention that is quickly turning to targeting: as in even more deeper cuts in reimbursement.
Several of the examples included:

Medicare recipients in Connecticut are more than two-times more likely to be admitted to a nursing home than residents in Arizona.

Medicare spends an average of $8,800 on a patient’s home healthcare in Louisiana – while spending $3,800 in New Jersey.

The rate at which beneficiaries receive post-acute services covered by Medicare in Chicago is three times the rate in Phoenix.

And the aggregate economic impact of variability in per capita spending is substantial. As the growth in post-65 age cohorts continues to accelerate both the inherent cost contribution (demand) as well as cost-push inflation (a result of seeking to satisfy that demand with scarce resources) is increasing. As reported in the Kaiser article, Medicare spending on PA/LTC, “has grown at 5 percent a year or faster in 34 of the nation’s 50 most populous hospital markets in recent years.”

The article goes on to describe the perceived reasons behind the variability that has captured CMS’s attention:

Misaligned incentives: Hospitals have not historically been economically impacted by the consequences of post-hospital care delivery, while PA/LTC providers have been incentivized to drive utilization based upon maximizing reimbursement rather than the appropriateness of the setting.

Information asymmetry: Very often PA/LTC referrals are a function of personal relationships and familiarity between those responsible for discharge planning and those responsible for marketing available beds.

Provider ambiguity: The evolution and confusion that today characterizes post-acute care services and settings (and the impact technology is having on care settings – e.g., telemedicine) often impairs market competition.

Lack of care coordination: While post-discharge readmissions have captured the popular media’s attention because of the ACA payment penalty, it’s the underlying lack of care coordination between acute and PA/LTC providers that results in cost inefficiencies extending well beyond avoidable readmissions.

These concerns, taken together with other indicators of potential waste and inefficiency (please refer to the article cited), will drive tremendous pressure in the years ahead to lower Medicare post-hospitalization expenditures (thus the chainsaw metaphor). How PA/LTC providers address these pressures will mean the difference between staying in business – or not.

BACK TO VALUE
When thinking about performance improvement as a vehicle to address this challenge remember this: more than any other singular criteria, successful PA/LTC organizations that survive the next decade will have learned to trade on value. Value in healthcare is quite simply the patient’s satisfaction with the care delivery experience divided by the cost to provide that experience (with the notable understanding that a patient’s satisfaction is typically augmented by their families’ satisfaction). With or without the Affordable Care Act, that is where the industry is headed.

But what does it mean to, “trade on value?” To help Pub visitors begin thinking about that I have provided a few fundamental questions that you might want to ponder – or discuss with colleagues:

1. What’s most in demand?
   If Medicare, Medicaid and private insurers were to evaporate tomorrow, what core service offerings that you provide would be the most likely to still generate revenue? What distinguishes those services from others?
2. Where do we fit in the care continuum?
   Forget the fancy charts and graphics of think tanks and consultants showing you where you fit. Think about the patients you care for every day from the perspective of their overall care experience: where does your organization provide the greatest value to that patient’s recovery along the care continuum?
3. Who wants to work with us?
   How do potential partners in your market determine their value? Based on that understanding, can you enhance their value? What are the risks that you would lower it? Can you effectively address those risks?

4. How do we protect and enhance our core value?
   In healthcare, more than any other industry, the innate ability to produce value is primarily attributable to direct caregivers. What should you be doing today to ensure you protect that most valuable resource? And what should you be doing tomorrow to help those caregivers increase the value you provide to patients?

   
   Cheers,
     Sparky