We have all heard that post-acute care costs are rising faster than other medical expenditures. But just how costly PAC can be may come as a surprise. A Brandeis University study concluded that post-acute care expenditures accounted for about 70% of the costs for a 90-day episode for certain conditions including congestive heart failure, chronic obstructive pulmonary disease, and renal failure. Health Plans and ACOs assessing value improvement strategies are turning to PAC. There is a big opportunity here, but realizing the maximum savings potential will not be easy.
Today, the PAC model of care is not value-based care friendly. There is a lack of accountability for the care of a patient across the continuum of PAC service providers and no clear guidelines to direct a patient to the most appropriate setting of care for his condition. In addition, there is a preponderance of fee-for-service reimbursement, a lack of data to support meaningful evaluation of provider performance, and a dearth of systems interoperability. Health plans and ACOs are starting to capture the seemingly low-hanging fruit by reducing SNF days. In 2012, MSSP SNF savings, for example, represented 36% of overall ACO savings. However, appropriately reducing SNF days is merely the tip of the iceberg. With an accountable home-centric PAC model there is the potential to save 25% of the cost of a 90 day episode.
Capturing the full potential of a value-based PAC strategy, however, will require a new PAC paradigm – a health plan and PAC provider partnership model based on aligned financial incentives, data interoperability, and superior analytics. The keystone of the new model will be an at-risk PAC entity accountable for managing all post-acute care services for the 90 days post hospital discharge. The accountable PAC manager enters into an at-risk contract with the health plan, assumes responsibility for care transitions, and ensures the appropriate site and path of care for each patient based on her condition. Advanced technology and analytics are essential to enable site-of-care optimization based upon referral quality scores for each PAC provider by disease category. Intelligent analytics will be employed to forecast the probability of readmission and identify the safest and fastest path to the home.
Federal and state legislative and regulatory changes are slowly moving the post-acute industry into the value- based care world. But financial and operational alignment between health plans and PAC providers is critical to realizing the full potential of a PAC value improvement model. With the right PAC partner, a health plan can significantly reduce expenditures incurred during a 90-day episode of care: 27% reduction in PAC services costs, 35% reduction in hospital readmissions, and 10% to 15 reduction in administrative and unit costs. In addition, the new PAC model will facilitate management of the full continuum of care and contribute to improved population health, as well as improved quality and Stars performance. Our experience with this model has produced a 38% decrease in readmissions for a health plan client and $50 million in savings.
The aging of the baby boom population will continue to drive an escalation of PAC usage and costs. Actively aligning with a full service, at-risk PAC provider may be the most significant value improvement strategy a health plan can undertake to improve costs and quality over the next decade.