Bundled Payments

How ‘Home-to-Home Time’ Supports the Goals of Bundled Payments

Addressing the tendency of fee-for-service to promote more spending requires changing the metrics that motivate clinician behavior away from volume as a primary focus. The DRG system, an early example of bundled payment, represents an attempt to solve the problem by paying hospitals a set amount for each hospitalization. DRG-based reimbursement incentivizes hospitals to keep costs down by eliminating unnecessary services and by shortening length of stay (LOS). Indeed, in the 30 years following the introduction of the DRG system, average hospital LOS nearly halved, dropping from 10.0 days in 1983 to 5.1 days in 20131,2.

This fix may have had unintended consequences. After adjusting their practices to discharge patients home as soon as it was safe to do so, some hospitals went a step further by transitioning sicker patients to SNFs rather than keeping those patients in-house until they could safely go home. Over the last three decades, the proportion of Medicare patients leaving a hospital who were discharged to a SNF quadrupled from 5% to 20%3,4. This shifting of days from the acute to the post-acute facility setting has several negative consequences: it adds an extra transition, increases the overall time that patients spend in facilities, and increases the cost to Medicare since SNFs are reimbursed by the day whereas hospitals are paid a lump sum for the patient stay. This last point is likely part of the reason that Medicare’s spending per hospital admission on combined inpatient and post-acute facility stays increased by nearly 10% from 2004 to 20115.

One proposal for addressing this problem is adjusting the LOS metric to encompass the entire time that a patient spends away from home regardless of what type of healthcare facility they’re in. Recently dubbed “home-to-home time” by Barnett et al.5, this metric would discourage hospitals from merely swapping hospital days for SNF days and encourage them to coordinate care with the post-acute facilities to which they discharge their patients in order to keep the SNF LOS down.

Common strategies for driving down costs in bundled payment models include discharging patients directly home when possible, limiting length of post-acute facility stays, and preventing avoidable readmissions. The first two are captured by the home-to-home time metric, which creates a similar motivation for hospital staff to coordinate with post-acute providers. In this way, a focus on home-to-home time can be seen as a sort of “bundled payments lite,” as it is designed to limit costs during the first part of a patient’s episode.

The home-to-home time metric, currently just an idea, could be part of a broader strategy to move provider organizations from volume to value. Likewise, payers that are interested in implementing episode-based payment models could incorporate home-to-home time into their payment calculations. If implemented, just as post-market surveillance is required for new medications, close monitoring for unintended consequences of the home-to-home metric would be required.

1. Guterman S, Dobson A. Impact of the Medicare prospective payment system for hospitals. Health Care Finance Rev 1986;7:97-114.

2. Centers for Medicare and Medicaid Services. CMS program statistics: medicare utilization.

3. An all-payer view of hospital discharge to postacute care, 2013. Statistical brief #205. Rockville, MD: Agency for Healthcare Research and Quality, May 2016.

4. Morrisey MA, Sloan FA, Valvona J. Shifting Medicare patients out of the hospital. Health Affairs (Millwood) 1988;7:52-64.

5. Barnett M, Grabowski D, Mehrotra A, Home-to-Home Time – Measuring What Matters. N Engl J Med 2017; 377:4-6. 2017.

Tagged: Bundled Payments