News and Events

For Good or For Now: A Brief Discussion of the Medicare Spending Growth Slowdown

Author: Bill Brody

There has been some buzz recently about the altogether-welcome-but slightly-surprising slowdown in Medicare Spending Growth. Peter Orszag mentioned it here yesterday, and referenced an earlier discussion of it by Maggie Mahar on her HealthBeat blog here. Ms. Mahar even goes so far as to say in her opening paragraph that this deceleration is “eye-popping.”

Based largely upon the conversations we are engaged in I cannot say I am truly surprised by this. Our team is taking calls here every day from hospitals, health care systems, home health and home care agencies and other care providers looking to stay ahead of the curve when it comes to providing better, more effective care. Recently we attended the Cross-Setting Collaboration Summit here in Chicago, where we spoke with plenty of folks with titles like Care Navigator and Transition Coach. A year ago I don’t remember meeting a single person at a similar show sponsored by the ACMA with a title like that.

Clearly the penalties set to hit in 2013 as a result of the Affordable Care Act are casting a long shadow. But, instead of passively waiting and bracing themselves for the impact, hospitals are using this benchmarking period to examine their operations and look for ways to improve. Clearly the concept of care coordination is getting a lot of attention, as evidenced by the personnel changes and FTEs being put into place to navigate discharge and help patients transition smoothly.

As the slowdown in Medicare spending growth indicates, when hospitals put their minds to it, they can make a difference. But it’s not just their minds they are putting to it. As a recent study published in the Archives of Internal Medicine by researchers at Baylor Health, hospitals are forced to face the reality that successful care transition programs require additional capital resources. In today’s environment, preventing readmissions impacts revenue, and, of course, hiring those Care Navigators and Transition Coaches costs money. Once effective care coordination programs are in place they can be resource-intensive, often requiring multiple home visits and phone calls.

Naturally, too, hospitals are starting small, and engaging patients has proven to be difficult (another conclusion of the Baylor study). It follows then that expenses will ratchet up as hospitals look to take the success they are having and expand to more patients and other diagnoses.

To recap then, we have a slowdown in Medicare Spending Growth over the last 18 months as evidence that hospitals are proving the old adage that “what you measure will improve.” But even before any penalties hypothetically hit, these improvements come with a high cost, and that cost will surely rise as care coordination programs scale. This is the quandary faced by Ken Davis as outlined by Orszag. Taken to the extreme, hospitals can better care themselves right into difficult financial straits.

Presuming the looming penalties are a given, the most important variable here has to do with the amount of resources necessary to successfully achieve better outcomes. This is what hospitals will have to keep under control. Making the right decisions with regards to the proper personnel is crucial; equally crucial will be the IT investment. The right software platform standardizes protocols, integrates cleanly with legacy IT and helps one Transition Coach do the work of ten, or twenty, or a hundred. Only then can the financial piece start to come more into balance.