Is This an Opportunity for Entrepreneurs?

Tom Scully thinks so. This is from the NYT Magazine:

Medicare, which picks up a majority of their health bills, encourages hospitals to discharge patients quickly after surgery, but it doesn’t offer financial incentives to choose one form of post-acute care over another. And because discharging a patient to home care requires a lot of extra work — ensuring that the correct equipment will be in the home, training family members and so forth — many doctors choose the easier option. They can simply ask a nurse to send the patient to a rehab facility, and everything is handled in about a minute. Medicare automatically approves payment for 20 days of recuperation in a nursing home, and many facilities simply treat the patient for the full allotment. “Miraculously, everyone is cured on the 21st day,” Scully says…

On average, Medicare’s fee-for-service model pays for about 2,000 days in a post-acute care facility for every 1,000 beneficiaries. By comparison, Kaiser Permanente, a provider of low-cost quality care, averages 600 days per 1,000 clients while achieving better outcomes.

Comments (15)

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  1. Devon Herrick says:

    We often read about regional differences in Medicare spending. The vast majority of regional variation is actually differences in post acute care. Scully’s venture consists of a provider that uses algorithms to reduce waste and unnecessary readmissions in post acute care.

  2. Linda Gorman says:

    Medicare HMO enrollees tend to be healthier. And days in rehab aren’t the outcome we should be targeting. Which set of treatments is more likely to result in the ability to live on one’s own without significant disability?

    There are a couple of papers that have looked at this that don’t support the idea that less is more.

  3. Allan (formerly Al) says:

    I don’t agree with the author about Kaiser because Kaiser has a major problem with regard to care, but as a physician I know it is absolutely true that the incentive is to push the patient out of the hospital even before the patient is ready since one knows that out patient nurses and rehab will fill the gap at tremendous cost. A lot of extra DME costs are created for the same reasons.

    • JD says:

      Right, it is a poor system. Having consumer driven health care would eliminate these perverse incentives.

    • Dewaine says:

      I didn’t realize that Kaiser was much worse. Would you be able to elaborate?

      • Allan (formerly Al) says:

        I could elaborate, but that would require considerable space. I don’t know what you already know or don’t know so let me just touch on a few of the problems permitting you to ask further if you find it absolutely necessary.

        Firstly, you probably think that Kaiser is a non-profit organization. It isn’t. The hospital corporation is, but the physician group is not. The agreement between the physician partners and the hospital is that the partners share the profits 50:50 with the hospital. That provides a tremendous incentive for the physician partners to under treat. The agreement was known as the Tahoe Accord.

        Secondly, the non partner physician work under the physician partner. Thus the non-partner’s job is dependent upon following the incentives provided to the partner. For the non-partner to become a partner he has to demonstrate like minded attention to the incentives.

        Third, taking Kaiser to court should those incentives make him under treat and thus cause harm to the patient: 1)Note that California has Micra which prevents large awards and thus attorney’s do not want to go to court against Kaiser. 2)Kaiser has an arbitration clause in the contract. 3)Judges that decide the arbitration case make considerable amounts of money. Both parties choose the judges, but the judges have learned that they will not be hired for arbitration should Kaiser lose too many cases. Kaiser is involved in every case and the patient only once so Kaiser knows how to work the system and the patient doesn’t.

        Additionally Kaiser frequently settles, but non disclosure agreements are made and the award is forfeited if the patients breaks the agreement.

        Fourth, Kaiser uses some of their own guidelines to save money. Those guidelines at least in the past were inferior to the guidelines of the specialty groups.

        Fifth, to my knowledge some states have not permitted Kaiser to open offices in their states because of ethical violations. I think Kaiser has had to leave other states.

        Sixth and final with plenty left to go. You might remember the pill splitting case. Kaiser lost that one because it had members, to their detriment, splitting pills not meant to be split causing inadequate dosing.

  4. Dewaine says:

    Definitely an opportunity, I hope that there aren’t too many barriers to entry.

  5. JD says:

    “Medicare automatically approves payment for 20 days of recuperation in a nursing home, and many facilities simply treat the patient for the full allotment. “Miraculously, everyone is cured on the 21st day,” Scully says…”

    Inaccurate allocation. Either paying for too much or too little (depending on the person).

  6. Sabal says:

    This is the end result of having artificial limitations that don’t adjust to consumer demand.