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Six Characteristics of Successful Post-Acute Care (PAC) Value Networks

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April 18th, 2017

Six Characteristics of Successful Post-Acute Care (PAC) Value Networks

Between 2001 and 2015 Medicare payments to post-acute care (PAC) providers more than doubled.[1] As such, PAC represents a growing opportunity for value-based entities such as accountable care organizations (ACOs), bundled-payment model participants, and medical groups to create savings in overall spend.

Consider that five percent of Medicare beneficiaries account for almost 50 percent of all spending[2] and that chronic conditions in Medicare are linked to more than 75 percent of high-cost beneficiaries.[3] Furthermore, even the least expensive 50 percent of Medicare beneficiaries only account for four percent of  costs,[4] suggesting that preventive care alone for older adults probably won’t save as much money as it would for a younger population. For older adults and the most expensive Medicare beneficiaries, the signals are very clear: coordinated care management and specialized resources are needed.

With the increase in hospital and health system value-based payments and their financial stake in the care patients receive after discharge, the role of PAC has never been more at the forefront of focus as a means of decreasing episode costs and increasing quality outcomes. PAC is the next frontier of opportunity for integrated delivery networks (IDNs), health systems under payment risk, ACOs, bundled payment awardees, and Medicare Advantage (MA plans).

As hospitals begin to partner with PAC providers and create PAC management programs, it is important to carefully evaluate costs and quality:

  • Costs: recognizing that the current payment system incents the PAC provider to maximize their revenues by giving the patient as much therapy as possible (which creates higher coding and longer length of stay).
  • Quality: recognizing that much of a skilled nursing facility (SNF) or home health agency’s quality is derived from self-reported data.

Realizing PAC optimization in a value-based economy and bridging the gap between hospital and home is key to hospital/PAC collaboration success. However, there are complex challenges ahead for PAC integration in the framework of value-based payments, including creating equitable alignments where a SNF can stay financially viable and offset its decreased revenue from lowering the amount of therapy it provides and lowering its length of stay, with increased referral volume from the hospital.

To ease the complex challenges for PAC integration, hospitals and IDNs can utilize a framework of characteristics in assessing and managing a PAC value network. This unique framework of characteristics was developed by Leavitt Partners and is outlined in the adjacent graphic.

An effective PAC management model should optimize the right PAC providers, the right tools, and true collaboration with aligned and equitable interests. In such cases, providers can work together in a single, aligned care team with shared accountability — where incentives to collaborate and superior outcomes are actualized and mutual benefit from the PAC value-enhancing opportunity is derived.

Leavitt Partners believes that PAC optimization can help providers successfully transition to a value-based economy by bridging the gap between hospital and home. Our tools and research support providers as they consider potential PAC and SNF partners. Please contact Natalie Burton natalie.burton[at]leavittpartners.com if you are interested in learning more or receiving our upcoming publications.


[1] MedPAC, 2015 Report, Chapter 8, Home Health Care Services, http://www.MedPAC.gov/docs/default-source/reports/chapter-8-home-health-care-services-march-2016-report-.pdf?sfvrsn=0
[2] Cohen, Steven B.; Yu, William; 2012, “The Concentration and Persistence in the Level of Health Expenditures Over Time: Estimates for the US Population,” Agency for Healthcare Research & Quality (AHRQ), https://meps.ahrq.gov/data_files/publications/st354/stat354.pdf
[3] Congressional Budget Office, High-cost Medicare beneficiaries. A CBO Paper. May 2015.
[4] Moffit, Robert; Senger, Alyene; “Medicare’s Rising Costs and the Need for Reform,” The Heritage Foundation, http://www.heritage.org/health-care-reform/report/medicares-rising-costs-and-the-urgent-need-reform
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