Medicare Spends Significantly More on SNF Stays Than Private Plans — With No Clinical Difference

Commercial insurance payers spend significantly less on post-acute and skilled nursing care — with much shorter SNF stays — compared with Medicare fee-for-service reimbursements.

But even though Medicare pays more for post-acute care and SNF stays, there are no significant differences in readmission rates — suggesting that there may not be any clinical benefits to the increased spending, according to a study published in the September issue of the journal Health Affairs.

The researchers found that for almost every condition and form of post-hospital care, Medicare patients were associated with significantly more spending than privately insured patients — with costs for Medicare hip-replacement patients more than double that of hip-replacement patients who were privately insured.


But the differences in the percentage of patients receiving any care after the hospital stay were “relatively small,” Scott Regenbogen of the University of Michigan, one of the study authors, told Skilled Nursing News.

“[D]espite this excess spending, the two groups had similar rates of readmission to the hospital within 90 days of leaving — a measure of how well a patient’s recovery has gone,” he explained via e-mail. “This suggests that providers are making similar clinical decisions about what to do regarding post-hospital care for both types of patients, but that Medicare is more permissive regarding the volume of services delivered and therefore the costs.”

They researchers compared post-acute spending between Medicare beneficiaries in Michigan and clinically similar individuals who were approaching the age of Medicare eligibility and insured by Blue Cross Blue Shield of Michigan (BCBSM), the most common commercial insurance program in the state. They used data from the Michigan Value Collaborative, a statewide consortium of 76 acute-care hospitals and BCBSM; the researchers included patients, aged 60 to 64, insured by the BCBSM preferred provider organization and by fee-for-service Medicare.


After excluding certain patient groups to improve comparability, the final sample had 25,628 patients.

Ultimately, when patients transitioned to Medicare at age 65, the use of and spending on post-acute care after hospitalization increased significantly, but the additional spending and inpatient facility use among those patients was not linked with a decrease in the likelihood of readmission, the researchers found.

It’s a finding that is reflected in other research, Regenbogen noted.

“Prevention of readmission has often been a justification for the use of inpatient post-acute care, yet there does not appear to be evidence that spending levels seen in commercial insurance have adverse consequences for readmissions,” he told SNN. “We have seen this same finding in other research that we recently presented at AcademyHealth Annual Research Meeting: There have been significant reductions in the use of SNF and inpatient rehabilitation after lower extremity joint replacement in Michigan, but this reduction has not been associated with increases in readmissions, even among the hospitals with the very greatest rates of decline.”

The fact that decreased inpatient post-acute care and readmissions don’t appear to be related suggests that reducing clinically unnecessary SNF use after hospitalization could be a successful strategy under episode-based payment initiatives, Regenbogen said.

Several bundled payment programs have already zeroed in on SNF care as a place to generate savings — by cutting SNF utilization. The Comprehensive Care for Joint Replacement (CJR) bundled payment model, a mandatory program, reduced Medicare spending “nearly exclusively” through cutting SNF spending, researchers at Harvard University found. Bundled programs also have the effect of exacerbating existing Medicaid issues, leading United Hospital Fund researcher Gregory Burke to warn SNFs that “bundling is not your friend.”

Payment policy could be a way to incentivize the “high-value use of post-acute care,” according to the authors of the Health Affairs study. This could be defined as “clinical indications and situations in which it improves recovery and/or prevents readmissions and other adverse events,” Regenbogen explained.

For SNFs, that may translate to more scrutiny from their acute-care partners.

“[H]ospitals and providers need to carefully assess the value of post-acute care that they prescribe, and as they are increasingly subject to financial incentives related to overall episode spending, they will need to be very selective about the use of the highest cost care settings after hospitalization, such as SNF,” Regenbogen told SNN.

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