April 2, 2019
How hospitals PAC their way to profits

Research says specific hospital ownership keeps care costs down

See which type of PAC providers prove most lucrative

It’s no secret that today’s reimbursement programs compensate providers for keeping care costs in check. So for years, researchers have closely studied the financial impact of hospitals owning their own post-acute care providers. While past reports have yielded inconclusive results, a recent analysis published in Health Care Management Review offers some interesting insight into which types of relationships translate to greater profits.

Bigger incentives, better outcomes

As of 2015, data suggests that roughly 80% of U.S. hospitals owned their own source of post-acute care, although the kinds of providers varied. The study took a look at skilled-nursing facilities, home health agencies and inpatient rehabilitation facilities in particular, with a focus on the cumulative costs associated with ‘episodes of illness.’ Their findings show great promise for hospitals, especially given impending changes to current payment models (see our latest post on preparing for PDPM). Still, it is important to note certain types of PAC ownership actually result in higher overall care costs.

 

Fruitful findings

According to the report’s methodology, researchers examined “panel data on hospital ownership of PAC providers from the American Hospital Association for 2013-2015 and cost of care data from Centers for Medicare & Medicaid Services’ Value-Based Purchasing Program…[to] quantify the association between a hospital’s PAC ownership choice and the episodic cost of care.”

The results indicate that hospitals owning SNFs or HHAs saw higher rewards and lower costs of episodic care. However, hospitals owning IRFs suffered the opposite effect, with treatment totaling more money across the board.

While investigators have yet to consider the specific methods used by hospitals to lower care expenses in these PAC providers, their strategies are clearly paying off. According to the report’s author, “Further research could explore exactly how hospitals are achieving these cost reductions, whether through better care coordination or putting new systems in place.”

Furthermore, by tracking trends associated with these types of ownership situations, PAC providers (of all kinds) can glean important strategies sure to benefit patients and facilities alike. Stay tuned for more cost-cutting industry insight, and as always…..