Health Law Daily Spending declines on severe wound care may be due to site of care changes attributed to dual payment system
Tuesday, January 5, 2021

Spending declines on severe wound care may be due to site of care changes attributed to dual payment system

By Sherri M. Schroeder, J.D.

Limited information is available on changes in quality of severe wound care.

A recent report by the Government Accountability Office (GAO) on changes to severe wound care provided to Medicare beneficiaries in fiscal year 2018 compared to fiscal year 2016 showed that the two percent decline in spending (from $2.06 billion in 2016 to $2.01 billion in 2018) could be attributable, in part, to a change in where beneficiaries received care. The data showed fewer severe wound care stays at long-term care hospitals (LTCHs), which tend to be paid higher payment rates, and an increase in such stays at acute care hospitals (ACHs) and inpatient rehabilitation facilities. While LTCH stays decreased about seven percent from 2016 to 2018, Medicare beneficiaries continued to have access to other severe wound care providers. However, there is limited information on how or whether the decrease in LTCH care for severe wounds may have affected the quality of care Medicare beneficiaries received (GAO Report, GAO-21-92, January 4, 2021).

Context. A severe wound is defined to include non-healing surgical wounds, stage 3 wounds (i.e., those where skin tissue is lost), and stage 4 wounds (i.e., those where bone or muscle is exposed). Medicare beneficiaries with serious health conditions, such as strokes, are prone to developing severe wounds due to complications that often lead to immobility and prolonged pressure on the skin. These beneficiaries may require a long-term inpatient stay at an ACH or a post-acute care facility such as an LTCH, which treats patients requiring care for longer than 25 days on average.

Prior to 2016, LTCHs received a higher payment rate of treating Medicare beneficiaries than ACHs. Beginning in fiscal year 2016, a dual payment system was phased in that paid LTCHs a rate similar to ACHs for some beneficiaries and a higher rate for beneficiaries that met certain criteria. In general, to qualify, a Medicare patient admitted to the LTCH following a stay at an ACH must have received three or more days of care in an intensive care unit at the ACH, or required at least 96 hours of mechanical ventilation services at the LTCH. Between fiscal year 2016 and fiscal year 2020, LTCH patient cases that did not meet these criteria were paid a blended rate equal to 50 percent of the standard payment rate, plus 50 percent of the site neutral rate. Beginning in fiscal year 2020, LTCH patient cases that do not meet these criteria are paid a 100 percent site neutral payment rate.

The GAO report describes facilities where Medicare beneficiaries received severe wound care, Medicare severe wound care spending, and what is known about the dual payments system’s effect on access and spending data for fiscal years 2016 and 2018. The study was performed in order to answer lawmakers’ questions about how the dual payment system may have affected severe wound care for Medicare beneficiaries as the dual payment system moved from partial to full implementation.

Most common treatment setting. For fiscal year 2018, data showed that 287,547 beneficiaries were diagnosed as needing severe wound care; such diagnoses were associated with 441,676 inpatient stays across acute care and post-acute care settings. The majority of these inpatient stays (72.8 percent) were in ACHs. Approximately 42 percent of these ACH stays resulted in discharges to the home, to a skilled nursing facility (SNF) (approximately 32 percent), to an LTCH (approximately 5 percent), or to an inpatient rehabilitation facility (IRF) (approximately 4 percent).

Factors affecting treatment setting. Clinical factors that influenced where Medicare beneficiaries may receive severe wound care included the comorbidities and treatment needs of the beneficiaries, variation in services and treatment capabilities among different facility types (e.g., LTCHs and ACHs are generally more equipped top provide ventilator services for beneficiaries with complex and severe health conditions as compared to SNFs, IRFs, and home health settings), and variation in services and treatment capabilities within the same facility type.

Non-clinical factors that influenced where Medicare beneficiaries may receive severe wound care included payment factors (discussed below), physician and patient preferences, and proximity to a post-acute care facility.

Payment factors. According to the GAO, certain post-acute care facilities’ decisions to admit or discharge Medicare beneficiaries may be based on payment factors. For example:

  • Under the implementation of the LTCH dual payment system, LTCHs receive the standard payment rate only for stays where severe wound care beneficiaries had a prior three-day intensive care unit stay or were on a ventilator.
  • The cost of providing wound care generally exceeds the site neutral payment rate, and severe wound patients often represent LTCHs’ most expensive patients with the longest lengths of stay. This discourages LTCHs from admitting severe wound care beneficiaries who do not meet the standard payment rate criteria because they would be paid the lower, site neutral payment rate for these patients.
  • SNFs are not required to accept all patients, so they may not admit certain patients because they do not have the resources or staff available to meet their needs by providing some of the more expensive treatment interventions, such as hyperbaric oxygen therapy or certain wound dressings.
  • Providing expensive wound treatments could exceed the set daily amount SNFs receive that covers beneficiaries’ total level of care.
  • Medicare only covers up to 100 days of care in an SNF each benefit period, so some beneficiaries with severe wounds are discharged once they reach that limit because they cannot afford to pay out-of-pocket costs. Therefore, they must receive care at another setting such as an outpatient wound care center.

Spending decrease. Total Medicare spending on principal severe wound care states decreased about 2 percent during implementation of the dual payment system, from about $2.06 billion in fiscal year 2016 to about $2.01 billion in fiscal year 2018. The decrease was similar in both rural and urban areas. This decrease is attributed to a decrease in the number of stays (a decrease of about 1 percent, from 102,000 in 2016 to 101,000 in 2018), as well as a decrease in Medicare spending per stay (a decrease of about 1.4 percent, from $20,197 in 2016 to $19,915 in 2018). The decrease was likely driven, in part, by changes in where patients received care. Data showed that most facility types experienced a decrease in severe wound care stays from 2016 to 2018. The largest decrease was a 31 percent drop in severe wound care stays at LTCHs. This corresponded with the implementation of the dual payment system and the incentive that it created for LTCHs to focus their admissions on those beneficiaries meeting the higher standard payment rate criteria. As the number of LTCH severe wound care stays decreased, the data showed that total Medicare spending for LTCH severe wound care stays decreased by about 37 percent during this period, from $481.7 million in fiscal year 2016 to $304.8 million in fiscal year 2018. Furthermore, assuming utilization remains unchanged, Medicare severe wound care spending for LTCHs may continue to decrease in fiscal year 2020 under the full site neutral payment.

Limited data on quality. Data analysis showed that during dual payment system implementation, the number of LTCHs that billed Medicare for any severe wound care discharges decreased by about 7 percent, from 422 in fiscal year 2016 to 394 in fiscal year 2018. However, this decrease does not indicate that beneficiaries did not receive the care they needed because, in general, beneficiaries have access to other settings that provide such care. Furthermore, the loss of LTCHs in recent years has had minimal effect on beneficiaries because the majority of the losses occurred in geographic areas with at least one other LTCH or within a two-hour drive of another LTCH. In addition, most beneficiaries (about 92 percent) lived within 10 miles of an acute care or post-acute care setting that provided severe wound care in fiscal year 2018.

The GAO noted that there were mixed views on the effects of the dual payment system on the quality of severe wound care. Some facility representatives indicated that the dual payment system had a negative effect on the quality of care, while others have not found or do not expect a negative effect. Although CMS collects some quality data from post-acute care facilities related to severe wounds, these data focus on the development or prevalence of such wounds rather than the quality of their treatment. CMS also collects data on other quality indicators, such as hospital readmissions and mortality rates, but such indicators do not necessarily reflect how quality of care provided to patients with severe wounds by LTCHs compares to other post-acute care facilities.

MainStory: TopStory GAOReports IPPSNews CMSNews IRFNews LTCHNews PartANews PartBNews ProgramIntegrityNews ProviderNews QualityNews SNFNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More

Health Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on health legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.