Medicare Spending and Outcomes After Post-Acute Care

Posted: 22 Jun 2007

See all articles by Melinda Beeuwkes Buntin

Melinda Beeuwkes Buntin

The RAND Corporation

Partha Deb

City University of New York, CUNY Hunter College - Department of Economics

Jose Escarce

University of California, Los Angeles (UCLA) - RAND Health Sciences Program; National Bureau of Economic Research (NBER)

Carrie Hoverman

University of California, Berkeley

Neeraj Sood

University of Southern California; National Bureau of Economic Research (NBER); RAND Corporation; University of Southern California - Schaeffer Center for Health Policy and Economics

Abstract

Elderly patients who leave an acute care hospital after a cerebrovascular accident (CVA) or a hip fracture (HIP) may be discharged to home or undergo rehabilitation care in an inpatient rehabilitation facility (IRF) or skilled nursing facility (SNF). Knowing the costs and health outcomes of these alternatives is important to maximize the efficiency of post-acute care (PAC), but naive estimates are likely to be biased by unobserved patient selection. This study assesses Medicare payments for and outcomes of patients discharged to IRFs, SNFs, and home. In addition to adjusting for observable differences in patient severity across PAC sites, we use instrumental variables (IV) to account for unobserved patient selection.

We analyzed data on elderly Medicare CVA and HIP patients discharged from acute care between January 2002 and June 2003. We used acute hospital, home health, skilled nursing, and inpatient rehabilitation data to obtain total payments over 120 days after acute care discharge. Health outcomes were death and the joint outcome of death or long-term institutionalization in a custodial nursing home at 120 days after acute discharge. We estimated a pair of multiple-equation selection models, one for payments and one for health outcomes. In each model, there was a set of multinomial logit equations for the choice of PAC site and another equation was a linear model (for log-transformed payments) or a binary logit (for the health outcome). Independent variables included age; sex; clinical variables such as severity of the main condition, comorbidities, and complications; and hospital characteristics. The PAC site choice equations included measures of each patient's proximity to and local availability of IRFs and SNFs as IVs. In addition, we specified the joint distribution of latent factors that were incorporated into both equations to allow for unobserved influences on care choice to affect outcomes.

Our results indicate that selection has a sizable influence on estimates of health outcomes, but a much smaller effect on payments. Both IRF and SNF are more costly than going home. In addition, IRF improves health outcomes for both CVA and HIP. By contrast, SNF reduces mortality for HIP, but increases institutionalization for both CVA and HIP.

Of note, our IV estimates show the effects of IRF and SNF use for marginal patients whose decision to use IRF or SNF is swayed by the proximity and availability of these PAC sites and for whom, in a sense, the clinical decision is gray. Nonetheless, our prior work has shown that this is a sizeable group and thus policies designed to direct them to sites of care with paid less and/or with better outcomes could be warranted.

Keywords: health care financing, post-acute care, Medicare, selection models

JEL Classification: I11, I12

Suggested Citation

Buntin, Melinda Beeuwkes and Deb, Partha and Escarce, José and Hoverman, Carrie and Sood, Neeraj, Medicare Spending and Outcomes After Post-Acute Care. iHEA 2007 6th World Congress: Explorations in Health Economics Paper. Available at SSRN: https://ssrn.com/abstract=994050

Melinda Beeuwkes Buntin

The RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States

Partha Deb

City University of New York, CUNY Hunter College - Department of Economics ( email )

695 Park Avenue
New York, NY 10021
United States

José Escarce

University of California, Los Angeles (UCLA) - RAND Health Sciences Program ( email )

Los Angeles, CA 90095
United States
310-794-3842 (Phone)
310-794-0726 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Carrie Hoverman (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall

Neeraj Sood

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States

University of Southern California - Schaeffer Center for Health Policy and Economics ( email )

635 Downey Way
Los Angeles, CA 90089-3333
United States

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