Post-Acute Care — The Next Frontier for Controlling Medicare Spending

Abstract

A striking conclusion from the Institute of Medicine's recent report on geographic variation in Medicare spending is that post-acute care is the largest driver of overall variation.¹ Medicare pays for post-acute care — short-term skilled nursing and therapy services for patients recovering from acute illness (typically after a hospitalization), provided by home health agencies, skilled nursing facilities (SNFs), inpatient rehabilitation hospitals, and long-term care hospitals. In 2012, Medicare spending for these services exceeded $62 billion. For patients who are hospitalized for exacerbations of chronic conditions such as congestive heart failure, Medicare spends nearly as much on post-acute care and readmissions in the first 30 days after a patient is discharged as it does for the initial hospital admission (see graph ). Post-acute care spending for surgical episodes is somewhat lower but still substantial. Medicare payments for post-acute care have grown faster than most other categories of spending. For example, total Medicare spending for patients hospitalized with myocardial infarction, congestive heart failure, or hip fracture grew by 1.5 to 2.0% annually between 1994 and 2009, while spending on post-acute care for those patients grew by 4.5 to 8.5% per year.²