New Medicare Payment Policy Resulted in Poorer Outcomes for Patients Severe Wounds

In Fiscal Year (FY) 2016, Medicare began phasing in a dual payment system for long-term care hospitals (LTCHs) that would pay an LTCH differently for cases meeting criteria (“qualified” cases) and cases that did not meet criteria (“site-neutral” cases).  Under a fully implemented system, for LTCHs to meet criteria for a qualified case, a patient must have been discharged from a STACH immediately prior to the LTCH stay, and have spent at least 3 days in an intensive care unit during the STACH stay or received at least 96 hours of mechanical ventilation in the LTCH. For site-neutral cases, an LTCH will be paid the short-term acute care hospital (STACH) amount or its costs, whichever amount is lesser.

LTCHs, which treat chronically critically ill and medically complex patients who require hospital-level care for extended periods, are a particularly important care setting for severe wound patients. Medicare Fee-for-Service patients hospitalized with severe wounds in 2015 were six times more likely to be discharged to an LTCH compared to all Medicare discharges (7.1% vs 1.2%).  In FY 2015, 54% of severe wound patients treated in LTCHs would not have met criteria, and LTCHs treating these patients would have been at risk of receiving payment reductions between 20–40% for these cases during the phase-in period.

KNG Health researchers developed a difference-in-difference model to examine the effects of the recent changes in the LTCH Medicare payment policy on treatment patterns and outcomes for site-neutral severe wound patients.  The findings, published in the Journal of Medical Economics, show that the new patient criteria for LTCHs were associated with fewer site-neutral severe wound cases going to LTCHs, and higher readmissions and post-discharge sepsis.

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Services : Health Economics & Outcomes Research, Payment Policy & Delivery System Innovation, Practice Area - Healthcare Reform and Payment Innovation Expertise: , ,