The essential scan: Top findings in health policy research

What’s the latest in health policy research? The Essential Scan, produced by the USC-Brookings Schaeffer Initiative for Health Policy, aims to help keep you informed on the latest research and what it means for policymakers. If you’d like to receive the biweekly Essential Scan by email, you can sign up here.

Bundled Payment Model Decreases Post-Acute Care Discharge Rates without Affecting Volume

Study by: Amy Finkelstein, Yunan Ji, Neale Mahoney, and Jonathan Skinner

In April 2016, the Center for Medicare and Medicaid Innovation (CMMI) launched an experiment called the Comprehensive Care for Joint Replacement (CJR) model meant to further study the bundled payment models that CMMI has been experimenting with in recent years. As with all bundled payment models, CJR seeks to reduce spending for the episode while maintaining high quality of care by paying hospitals a single bundled payment meant to cover services delivered by all providers involved in a clinical episode. CMS establishes benchmarks by blending a hospital’s own historical spending on a procedure with average regional spending for that same procedure. Previous studies of various bundled payment models have shown promising results, but the programs have been voluntary, making assessments of impact very challenging. But the CJR model is not voluntary; it includes all hospitals in randomly selected metropolitan areas. On the positive side, the new study finds that metropolitan statistical areas (MSAs) participating in CJR were 2.9 percent less likely to discharge patients to post-acute care (PAC) facilities and spent $307 less on PAC care than control organizations. Furthermore, the authors found that MSAs participating in CJR did not strategically admit more patients in order to increase their payout from Medicare. However, the authors also found that CJR participation did not result in lower net Medicare spending-which means that CJR has thus far failed to accomplish its primary objective. These mixed findings could be attributed to the fact that participation in CJR is mandatory — meaning that it’s not just low-cost hospitals volunteering to participate in the study. However, it could also be explained by the fact that the financial incentives associated with the CJR are currently much lower than the financial incentives in other bundled payment programs and the fact that the program has no downside risk. In years to come, though, the financial incentives for CJR will be increased to match those of purportedly more successful bundled payment models and downside risk will be introduced. While the results of this interim study of CJR’s first year are decidedly mixed, it is important for us to wait for the results from later years (2019 and 2020) before drawing conclusions about CJR’s success or failure. Full study here.

Less Market Competition Linked to Reduced Insurance Plan Quality

Study by: Daria Pelech

In health insurance markets, a high level of competition is generally assumed to reduce premiums. The relationship between competition and plan quality, however, is less clear. A new paper analyzes the effect of competition on plan benefit generosity (one measure of quality) through exploiting a change in Medicare Advantage (MA) regulations which led to 40 percent of the private fee-for-service (PFFS) plans being cancelled. The researcher finds that out-of-pocket (OOP) costs increased in markets with more cancellations-meaning that plan quality decreased as competition decreased. After the cancellations, OOP costs for the average MA beneficiary rose about $132 annually. The authors believe these findings can be attributed to decreased competition because cancellations affected premiums and OOP costs for all MA plan types, even though the regulation only affected PFFS plans. Among remaining PFFS plans, annual expected OOP costs increased by $205 in the average county. Among Health Maintenance Organization plans and Preferred Provider Organization plans (plan types not affected by the regulation), cancellations resulted in annual expected OOP costs to increase by $91 in the average county. Interestingly, the author finds the effects of the cancellations on premiums to be much smaller than the effects on OOP spending and limited only to the plans directly affected by the regulatory change. Policymakers often focus on premiums when assessing the impact of insurance market policy changes, but this study provides important evidence that premium changes may be an insufficient indicator of the effect of these changes for consumers.  Full study here.

Discharging Medicare Beneficiaries to Long-Term Care Hospitals Wastes $4.6 Billion Per Year 

Study by: Liran Einav, Amy Finkelstein, and Neale Mahoney

In the 1980s, a new class of healthcare facilities was administratively created to protect 40 chronic disease hospitals from the lower reimbursement rates associated with the newly passed Medicare Inpatient Prospective Payment System. These facilities are called Long-Term Care Hospitals (LTCHs) and in recent decades they have become important providers of post-acute care (PAC) to Medicare beneficiaries-along with skilled nursing facilities (SNFs) and home health agencies (HHAs). Since their creation, the higher reimbursement rates associated with LTCHs have created an incentive for large for-profit chains to build new LTCHs. As a result of this incentive structure, the number of LTCHs in the U.S. has grown to over 400 — a ten-fold increase in under 40 years. A new paper leverages 16 years of Medicare data from 3,400 Hospital Service Areas to analyze the costs and benefits of LTCH entry into a hospital market. The authors find that 80 percent of discharges to LTCHs represent substitution from SNFs, while the rest represent substitution from discharge to home. Although patients discharged to LTCHs cost Medicare almost $1,000 more per day than patients discharged to SNFs and patients pay significantly more out-of-pocket, the authors find that LTCHs did nothing to improve mortality rates or decrease the amount of time spent in institutional care. The authors conclude that Medicare could save almost $4.6 billion annually with no harm to patients by not allowing for discharge to LTCHs. Full study here and New York Times piece here.