Countering Incentives of Unnecessary Hospitalizations

Considerable evidence suggests that many nursing home residents are hospitalized for changes in status that could be treated outside of the hospital, according to Joseph G. Ouslander, MD, and Robert A. Berenson, MD, in an article recently published in The New England Journal of Medicine (www.nejm.org/doi/full/10.1056/NEJMp1105449). And it’s quite clear that these unnecessary hospitalizations are costly and can lead to adverse outcomes, the authors add. Yet, the solution to this problem isn’t as obvious as it might seem, and its complexity is something we need to understand and take into account if we’re to address it, the authors note.

A number of factors contribute to the high incidence of avoidable hospitalizations among nursing home residents—and some factors aren’t as straightforward as others, Ouslander and Berenson report. Among these factors are discrepancies between Medicare and Medicaid reimbursement. Providing “in-house” treatment to a nursing home resident with Medicaid coverage, they note, can actually be a “lose-lose” proposition. “Medicaid programs do not benefit from savings that Medicare accrues from prevented hospitalizations of nursing home residents, even though the nursing home incurs an expense when managing changes in condition without hospital transfer,” the authors explain. Making matters worse, current payment policy can actually create an incentive for nursing homes to hospitalize residents with a change in status: If they do so, and the resident has an inpatient stay of 3 or more days, he or she may be eligible for Medicare Part A coverage for postacute care at the nursing facility “at three to four times the daily rate paid by Medicaid,” the authors point out. Many hospitals and physicians also have strong financial incentives to hospitalize nursing home residents.

Fortunately, there are ways around these counterproductive incentives. The approach that the Program of All-Inclusive Care for the Elderly (PACE) takes, for example, “pools” Medicare and Medicaid funds in a capitated payment system. Efforts to identify other payment policy changes that work are now underway. The Affordable Care Act (ACA) calls, among other things, for the development and testing of additional payment approaches designed to eliminate financial impediments to providing appropriate care to Medicare and Medicaid beneficiaries.

Even so, payment reform and offering nursing facilities financial incentives to treat residents in-house isn’t enough, Ouslander and Berenson write. Depending on the resources available and quality of care provided at the nursing home, getting treatment there, rather than in a hospital, may not be in the resident’s best interest. “Setting unrealistic expectations and providing incentives to poorly prepared nursing homes to mange such care rather than transferring residents to a hospital could have unintended negative effects on the quality of care and health outcomes,” the authors warn.

In light of this, incentives to reduce unnecessary hospitalizations of nursing home residents should focus on facilities that have the necessary expertise, staff, infrastructure, and culture of quality to do the job right. Facilities that are not well-prepared should get the assistance they need to improve, and demonstrate that they’ve done so, in order to qualify for additional funding for lowering hospitalization rates. There’s good news here, too, Ouslander and Berenson point out: Payment reform may result in overall savings to the Medicare program that could be used in part to help support improved capabilities of nursing homes to manage sicker residents without hospital transfer. The ACA also calls for quality assurance and performance improvement programs that can assist nursing homes in better recognition and management of acute changes in clinical condition.

The authors highlight other changes central to lowering the incidence of unnecessary hospitalizations of nursing home residents. While most of these recommendations focus on healthcare protocols and policies, Ouslander and Berenson also make a point of highlighting other types of reform that are needed, including tort reform.

“We can improve care and reduce…preventable hospitalizations of nursing home residents,” they conclude, “but it will require a multifaceted approach; commitment of energy and resources; teamwork among healthcare funders, regulators, healthcare professionals, nursing homes and hospitals; and a true focus on resident-centered care.”