The document discusses CMS's focus on reducing costs in post-acute care. It notes that post-acute care spending more than doubled from 2001 to 2013, yet there is little correlation between higher spending and better quality. CMS is aiming to link 50% of Medicare payments to quality by 2018 to control unsustainable spending growth. The document advocates for narrowing post-acute networks to include only high-performing and low-cost skilled nursing facilities, which can reduce costs and readmissions while maintaining or improving quality of care.

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Remedy’s SNF Performance Network
February 2016
Co-Authors: Catherine Olexa, LNHA, CALA, VP Performance Networks, Olivia Lynch, MHA, Quality Analyst
Why CMS is Focusing on Post-Acute Care
Healthcare is increasingly transitioning to value-based payment models in an effort to control spending
and improve quality. In 2014, the amount spent on healthcare in the U.S. per individual reached
$9,523
1
—more than twice the average of all other developed countries—and is projected to reach
$14,103 by 2021 if unchecked.
2
Total healthcare spending represents almost 18% of GDP, and is
expected to grow to 20% in the next five years.
3
Furthermore, Medicare alone represented 20% of
National Healthcare Expenditures in 2013, and is expected to grow significantly after 2015 due to the
growing utilization of medications and services by an aging population.
4
To counter this trend, the CMS is “setting clear goals—and establishing a clear timeline—for moving
from volume to value in Medicare payments.”
5
The Medicare program committed to have half of all
Medicare payments risk-based by 2018, and linking the remaining fee-for-service payments to quality
and value.
6
The Bundled Payments for Care Improvement Program (BPCI) is one of the largest
alternative payment model demonstration projects and aims to link acute providers to post acute
providers by aligning payment incentives during episodes of care.
The Institute of Medicine concluded in 2013 that as much as 73% of regional variation in Medicare’s
cost per beneficiary is driven by post-acute care.
7
Due to its tremendous variation and lack of
correlation with quality, spending in the post-acute represents a substantial opportunity for cost saving
and clinical improvement. From 2001 to 2013, PAC spending more than doubled—from $27 billion to
$59 billion (Figure 1).
8
Acute care BPCI participants nationwide are tightening relationships with trusted,
high performing post-acute providers and creating narrow networks to allow for increased collaboration and
cost containment in the post-discharge period of the episode.
1
Center for Medicare and Medicaid Services. National Health Expenditures 2014 Highlights.
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/NationalHealthExpendData/Downloads/highlights.pdf
2
The Miller Center, University of Virginia. (2014). Cracking the Code on Health Care Costs. Charlottesville, VA: State
Health Care Cost Containment Commission.
3
Ibid.
4
Centers for Medicare and Medicaid Services. National Health Expenditure Fact Sheet.
https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-
reports/nationalhealthexpenddata/nhe-fact-sheet.html. Modified 28 Jul 2015. Accessed 24 Sept 2015.
5
Burwell SM, Setting Value-based Payment Goals – HHS Efforts to Improve U.S. Health Care, 372 N. Engl. J. Med. 897
(2015).
6
Ibid.
7
INSTITUTE OF MEDICINE. VARIATION IN HEALTH CARE SPENDING: TARGET DECISION MAKING, NOT GEOGRAPHY (2013). Note: does
not reflect Medicare Advantage spending.
8
Dickinson V. MedPAC starts work on model to alter post-acute care pay. Modern Healthcare. 10 Sept 2015.
http://www.modernhealthcare.com/article/20150910/NEWS/150919995?utm_campaign=socialflow&utm_source=twi
tter&utm_medium=social. Accessed 17 Sept 2015.

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Figure 1
Patients who are hospitalized for exacerbations of chronic conditions incur nearly as much expense in
the 30-day post-hospital period – due to post-acute care and readmissions – as the expense of the
hospital stay.
9
From 1994 to 2009, for these types of patients, total Medicare spending grew annually
by 1.5-2.0%; yet post-acute care spending for these same patients grew annually by 4.5-8.5%.
10
There
is little evidence that this increase in post-acute care spending for these types of patients – especially
after the 30-day post-hospital period – benefits patients.
11
Furthermore, the significant geographic and facility-based variation in quality and spending contributes
to inconsistent clinical outcomes and unsustainable financial repercussions. For example, a Remedy
Partners analysis of Medicare claims data from 2013-2014 for a Major Lower Joint episode (DRG 469-
470) showed the average cost of care for SNF care was more than $8,000 in New Jersey, and only
$3,000 in Arizona (Figure 2).
12
9
Mechanic R, Post-Acute Care – The Next Frontier for Controlling Medicare Spending, 370 N. ENGL. J. MED. 692-94 (2014).
10
Chandra A, Dalton MA & J Holmes, Large increases in spending on postacute care in Medicare point to the potential for
cost savings in these settings, 32 HEALTH AFFAIRS 864-72 (2013).
11
See Jha AK, Going After the Money: Curbing the Rapid Growth in Medical Services More Than 30 Days after Hospital
Admission, 173 JAMA INTERN. MED. 2061-62 (2013); see also Likosky DS, et al., Growth in Medicare expenditures for
patients with acute myocardial infarction: a comparison of 1998 through 1999 and 2008, 173 JAMA INTERN. MED. 2055-61
(2013).
12
Data from Remedy’s Database of Phase I and II Medicare Claims from Q4 2013 to Q3 2014.
Source: Medicare Payment Advisory Commission (MedPAC), A Date Book: Health Care Spending and the Medicare
Program, June 2012 p.188, available at www.medpac.gov/documents/June12DateBookEntireReport.pdf
Billions($)
70
60
50
40
30
20
10
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Skilled Nursing Facility (SNF)
Home Health Agency (HHA)
Inpatient Rehabilitation Facility (IRF)
Long-Term Care Hospital (LTCH)

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Figure 2
The Institute of Medicine, as part of its report, concluded that bundled payments could reduce
geographic variation in spending, while other value-based payment models such as pay-for-
performance and accountable care organizations (ACOs) would not have a substantial impact.
13
Moreover, this is consistent with reports from CMS, concluding that while bundled payments reduced
readmissions,
14
ACOs did not.
15
Importantly, higher spending is not correlated with improved quality. In fact, stratifying a sample size
13
INSTITUTE OF MEDICINE. VARIATION IN HEALTH CARE SPENDING: TARGET DECISION MAKING, NOT GEOGRAPHY 116 (2013). See also
Auerbach D, Mehrotra A, Hussey P, Huckfeldt PJ, Alpert A, Lau C, Shier V. How Will Provider-Focused Payment
Reform Impact Geographic Variation in Medicare Spending? American Journal of Managed Care. 2015; 21(6): e390-
398.
14
Press MJ, Rajkumar R & PH Conway, Medicare’s New Bundled Payments: Design, Strategy, and Evolution, J. AMER. MED.
ASS’N (2015).
15
McWilliams JM, et al., Performance Differences in Year 1 of Pioneer Accountable Care Organizations, 372 N. ENGL. J.
MED. 1927-1936 (2015) (no statistically significant impact on 30-day readmissions); Pope G, et al., Financial and
Quality Impacts of the Medicare Physician Group Practice Demonstration, 4 MEDICARE & MEDICAID RES. REV. E1-E22 (2014).
Dark blue signifies lowest cost. Dark red signifies highest cost.
Comparing SNF Costs by State
Major Joint Replacement of the Lower Extremity

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of 2296 skilled nursing facilities into quartiles based on Remedy Partners’ SNF Efficiency Model
16
revealed that the top quartile not only spent almost half per SNF episode compared to the bottom
quartile, but readmission rates were also halved (Figure 3).
Figure 3
Remedy’s SNF Efficiency analysis highlights that utilizing high-quality, efficient SNFs not only reduces
costs during an episode of care, but also improves care outcomes. In the BPCI program specifically,
post-acute care represents nearly three-quarters of the care redesign savings opportunity for both
Model 2 and Model 3 participants. Hence, tight partnerships and care coordination efforts between
acute care providers and top performing post-acute providers are critical to success.
Several academic articles have suggested that narrow SNF Networks are one of the three ways a
provider can achieve success in reducing post-acute spending
17
. Remedy’s partner hospitals and
physician group practices nationwide are utilizing this approach to build high-value narrow SNF
Networks, and to inform patient choice through increased transparency about performance and
quality.
The Remedy Partners Approach: Narrow SNF Networks and Increased
Collaboration
Through a rigorous evaluation process that includes both quantitative and qualitative elements,
Remedy assists providers to select the best centers for inclusion in the narrow network through data
collection and analysis. Skilled Nursing Facility Scorecards are created for each hospital’s market that
inform the selection process. The evaluation largely focuses on SNF past performance, current clinical
16
Data from Remedy’s Database of Phase I and II Medicare Claims from Q4 2013 to Q3 2014, SNF Efficiency Model.
17
Mor, V, Momotazur, R, McHugh, J. Accountability of Hospitals for Medicare Beneficiaries’ Postacute Care Discharge
Disposition. JAMA INTERN. MED. (2015); Lage DE, et al., Creating a Network of High-Quality Skilled Nursing Facilities:
Preliminary Data on the Postacute Care Quality Improvement Experiences of an Accountable Care Organization, 63 J.
Amer. Geriatrics Soc’y 804-08 (2015); Mechanic R, Post-Acute Care – The Next Frontier for Controlling Medicare
Spending, 370 N. ENGL. J. MED. 692-94 (2014).

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process, relevant partnerships that may already exist via ownership structure, Model 3 BPCI
participation and affiliated MD presence (Figure 4). These factors are weighted together to create a
“Remedy Value Score” which informs the ranking on the Partner facing Scorecard.
Figure 4
Remedy’s SNF Evaluation Process
Informing Patient Choice: The Remedy Quality-of-Care Profile
The Medicare Program recently proposed that hospitals, as a condition of participating in the Program,
must provide quality information to patients about their post-acute site of care
18
. This increased
transparency will assist patients, families and care teams to make better decisions during the
discharge planning process. Remedy is helping providers to achieve early steps toward compliance
with this rule by publishing SNF Quality-of-Care Profiles. These patient facing documents highlight
quality information, specialty clinical programs, clinician availability and discharge planning processes.
Conclusion
Remedy Partners is helping providers prepare for the tidal wave of health care reform that is starting
now and will quickly escalate over the coming months and years as CMS links the reimbursement
model to quality outcomes and value instead of quantity of services provided.
Remedy’s SNF Performance network is a first step to ensuring that there is tight linkage between the acute
and post-acute settings for patients entering episodes of care in 500 partner hospital sites throughout the
country.
18
Medicare and Medicaid Programs; Revisions to Requirements for Discharge Planning for Hospitals, Critical Access
Hospitals, and Home Health Agencies; Proposed Rule, 80 Fed. Reg. 68126 (Nov. 3, 2015).