Payment Systems, Market Factors and Long-Term Care Hospitals.

Abstract

Long-Term Care Hospitals (LTCHs) have recently emerged as an important alternative to traditional settings for post-acute care (PAC), including skilled nursing facilities (SNFs) and inpatient rehabilitation hospitals (IRFs). LTCHs are accredited acute care hospitals and primarily serve long-staying patients with complex medical conditions. LTCHs have historically played a fairly minor role in the health care system, but in recent years have grown quickly in number, in Medicare outlays and in importance.

LTCHs are generally the most expensive PAC setting and payment rates for clinically similar patients have been as high as 12 times the rates received by other PAC providers. But, whether LTCH treatment practices differ substantially from other, less well paid providers, is not well understood. To promote equitable reimbursement, regulation and coverage under the Medicare program, policymakers must understand how LTCH patients, treatment practices, and outcomes of care compare to other PAC providers. This dissertation takes a close look at LTCHs and their role in PAC markets. First, LTCHs' role in PAC markets is quantitatively assessed by identifying similarity in structural characteristics, patient caseloads, and inputs to patient care among LTCHs, SNFs, and IRFs; this analysis also identifies local market characteristics associated with LTCHs' regional variation. This analysis reveals that LTCHs are more similar to other PAC providers than previously thought. Substitution of treatment appears to occur primarily among LTCHs, and hospital-based SNFs and IRFs. Second, the policy effect of prospective payment on LTCH practices is estimated. Because hospitals must qualify as LTCHs for Medicare payment, LTCHs face competing incentives to control costs and maintain their eligibility to LTCH payment rates. This analysis finds that the response to prospective payment varies across LTCHs. Finally, how well LTCHs, SNFs, and IRFs substitute for each other in providing care to prolonged mechanically ventilated patients is tested. Comparison of patient health and cost outcomes suggests that LTCHs produce better patient outcomes among some, but not all patients.