Advanced Financial Concepts in Healthcare: Medicare and Medicaid

As you navigate this course, you will come across some abbreviations. They are defined within the text but are also provided here in list format.

• CMS: Centers for Medicare and Medicaid Services
• FPL: Federal Poverty Level
• ACA: Affordable Care Act
• MCI: Mild Cognitive Impairment
• aMCI: Amnestic MCI
• AD: Alzheimer's Disease
• ALF: Assisted Living Facilities
• ILF: Independent Living Facilities
• HHA: Home Health Agency
• CKD: Chronic Kidney Disease
• SNF: Skilled Nursing Facilities
• RBRVS: Resource-Based Relative Value Scale
• CPT: Current Procedural Terminology
• PT: Physical Therapy
• OT: Occupational Therapy
• SLP: Speech-Language Pathologist
• LPN: Licensed Practical Nurse
• DRGs: Diagnostic-Related Groups
• RUGs: Resource Utilization Groups
• APCs: Ambulatory Payment Classifications
• HHRG: Home Health Resource Group
• PPO: Preferred Provider Organization
• HMO: Health Maintenance Organization
• LTC: Long-Term Care
• APN: Advanced Practice Nurse
• CNS: Clinical Nurse Specialist
• CRNA: Certified Registered Nurse Anesthetist
• NP: Nurse Practitioner
• CNM: Certified Nurse-Midwife
• NPP: Nonphysician Practitioner
• PA: Physician Assistant
• CNA: Certified Nursing Assistant
• HRRP: Hospital Readmission Reduction Program
• ED: Emergency Department
• ERR: Excess Readmission Ratios
• RACFs: Residential Aged Care Facilities

The Centers for Medicare and Medicaid Services (CMS) oversee government-run insurance options – Medicare and Medicaid, managed under the Department of Health and Human Services. Medicare, a universal health insurance plan for those over the age of 65, was signed into law by President Lyndon B. Johnson in 1965. This coverage extends to those with specific disabilities, including end-stage renal disease (ESRD). Numbers provided by the CMS report that 33,948,778 are enrolled in original Medicare, 31,799,519 are enrolled in Medicare Advantage or other plans, and 51,591,776 are enrolled in Medicare Part D (CMS, 2024b).

Medicaid, which provides coverage primarily to low-income adults, disabled individuals, and children, is another government program. According to Medicaid.gov (n.d.), as of March 2024, there are 82,751,338 enrolled in Medicaid or Children's Health Insurance Program (CHIP). The program has seen significant expansion under the Affordable Care Act (ACA), which allows states to provide coverage for "adults with incomes up to 138 percent of the poverty level." As of June 2024, 40 states have adopted this expansion, leading to greater coverage nationwide (Harker & Sharer, 2024).

Medicare and Medicaid affect more than delivery. It drives many financial standards for healthcare delivery, even for younger adults and children. The payment systems for Medicare are heavily woven into all other forms of healthcare financing because they are government-based. Access to healthcare financing is a significant factor driving patients' access to the services they need. To understand the entire picture, we first have to look at how healthcare, in general, is funded in America.

Financing medical services and care delivery is a highly complex process. Public and private funding have very substantial roles in this process. Many tax-financed programs serve a variety of patients. However, they must meet many established qualifications. Insurance overlap is common; for example, many Medicare beneficiaries often qualify for Medicaid. In the private sector, financing for health insurance is frequently shared between employees and employers, with the employer providing most of the financing. Those who are self-employed often purchase health insurance in the open market (Buppert, 2018; Leibler & McConnell, 2017; Shi & Singh, 2019).

Insurance, in general, is based on a few fundamental principles (Buppert, 2018; Leibler & McConnell, 2017; Shi & Singh, 2019).

1. Risk is unpredictable for the individual insured.
2. Risk can be predicted with a reasonable degree of accuracy for a group or population.
3. Insurance provides a mechanism for transferring or shifting risk from the individual to the group through the pooling of resources.

Cost-sharing is required so the insured can assume part of the risk. Cost-sharing helps to reduce the misuse of many insurance benefits. Cost-sharing also helps to control the utilization of healthcare services. Responsible behavior in healthcare utilization means the insured pays part of the cost (Buppert, 2018; Leibler & McConnell, 2017; Shi & Singh, 2019).

Many different types of health plan providers are included in private insurance. Managed care aims to integrate many essential functions of healthcare delivery efficiently. Managed care, the dominant healthcare delivery system within the United States, employs various mechanisms to manage medical service costs. It allows for coverage in both public and private insurance companies through contracts with a managed care organization (MCO); examples include a preferred provider organization (PPO) or a healthcare maintenance organization (HMO). MCOs contact many healthcare providers, such as physicians or even hospitals, to deliver services to enrollees (Buppert, 2018; Leibler & McConnell, 2017; Shi & Singh, 2019).

Medicare and Medicaid have established per diem, or daily rates for reimbursing places such as nursing homes, inpatient facilities, and hospitals. These per diem rates are based on actual costs providers incur during the previous year, also known as retrospective reimbursement. Home health is also usually reimbursed based on cost (Buppert, 2018). Because the retrospective method is generally based on charges directly related to the length of stay, services performed, and the cost of services, providers have no incentive to control costs (Buppert, 2018).

This method renders services indiscriminately because healthcare institutions could increase their profits by increasing costs. Because of the perverse financial incentives inherent in retrospective cost-based reimbursement, it has been primarily replaced by prospective reimbursement methods. In contrast to retrospective reimbursement, prospective reimbursement uses specific pre-established criteria to determine the reimbursement amount in advance. Medicare has used the prospective payment system to reimburse inpatient acute care services under Medicare Part A since 1983 (Buppert, 2018).

As previously mentioned, Medicare is a health insurance program for individuals over the age of 65, individuals with specific disabilities, and those with kidney disease. Medicare has different parts that help cover specific services. Medicare Part A, hospital insurance, helps cover inpatient care in hospitals, including critical access hospitals and skilled nursing facilities (SNFs). It also helps cover hospice and some home health care (Medicare.gov, n.d.). Medicare Part B, medical insurance, covers outpatient care, home health care, medical equipment, and preventative services (Medicare.gov, n.d.). Medicare Part D prescription drug coverage is available to everyone with Medicare. To get Medicare prescription drug coverage, people must join a Medicare-approved plan that offers Medicare drug coverage (Medicare.gov, n.d.).

Both the state and federal governments fund Medicaid. Many programs have special benefits, such as provider networks and payment methods, that help ensure accessible services (CMS, 2024a). Preventive care can help enrollees stay healthy and avoid unnecessary, costly care. Many toolkits and resources offered by CMS facilitate beneficiaries' learning about services offered and access to them.

States establish and administer their own Medicaid programs that help determine the duration, type, amount, and scope of services within federal guidelines. The federal government requires states to provide some mandatory benefits while making other options. The compulsory benefits include inpatient and outpatient hospital stays, home health, physician, and laboratory and x-ray services. Optional benefits include case management, prescription drugs, physical therapy (PT), and occupational therapy (OT) (CMS, 2024).

States can establish out-of-pocket spending and change premiums of Medicaid enrollees. Examples of out-of-pocket costs include deductibles, coinsurance, copayments, and other similar charges. Though maximum out-of-pocket expenses are limited, states can impose higher fees for individuals. Vulnerable groups, such as pregnant children and women, are exempt from many out-of-pocket costs, and coinsurance and copayments cannot be charged for certain services (CMS, 2024a).

Because of Medicaid rules, states are able to use out-of-pocket charges to promote the cost-effective utilization of prescription medications. States can establish varying copayment amounts for generic and brand-name medications. For example, for those who have incomes that are above the 150% federal poverty level (FPL), copayments may be as high as 20% of the cost of the drug. For those below the 150% FPL, copayments are limited to nominal amounts. States are also able to specify the qualities of "non-preferred" and "preferred" drugs and can set standards for copayment amounts for mail-order drugs (CMS, 2024a).

It is also possible for states to impose high copayments for patients who present to the emergency department (ED) for services that would not be considered an emergency. Copayments can be established up to the state's cost of services for those who have income above 150% of the FLP (CMS, 2024a).

There are conditions where individuals require both Medicare and Medicaid. To illustrate this, we will explore one Medicare-only example, one Medicaid-only example, and then a final fictional example of a patient situation requiring both forms of government-based healthcare.

SNFs that offer nursing, PT, OT, and speech-language pathology (SLP) services to Medicare beneficiaries are reimbursed through a prospective payment system under Part A of Medicare. If a patient needs services based on their clinical needs, Medicare mandates that SNFs provide these services, regardless of whether they fall under Part A or Part B coverage. Additionally, the SNF payment system and policies must undergo annual review and updates for the federal fiscal year (American Speech-Language-Hearing Association [ASHA], n.d.a).

The resource-based relative value scale (RBRVS), introduced by Medicare in 1992, reimburses physicians based on a value assigned to each service. These relative values consider the skill, time, and intensity required to deliver a service. The actual reimbursement amount is calculated using a complex formula. Each year, Medicare publishes the Medicare Fee Schedule, which details the reimbursement for each service and procedure identified by a current procedural terminology (CPT) code. These reimbursement rates are adjusted according to the geographic area where the practice is located. PPOs utilize a variation of the fee-for-service model, establishing fee schedules based on discounts negotiated with in-network providers. In contrast, HMOs may employ physicians on salary (ASHA, n.d.a).

The diagnostic-related groups (DRG) method is used to pay for hospital inpatient services. The predetermined rate is set according to DRGs. Instead of a per diem rate, the reimbursement method based on DRGs prospectively sets a bundled price according to the principal diagnosis at admission time. The hospital receives the predetermined fixed rate for that particular DRG classification. The primary factor governing the reimbursement amount is the primary clinical diagnosis. Still, additional factors can create differences in reimbursement rates for the same DRG. In 2007, Medicare severity (MS) DRGs were implemented and included patient severity to reflect the better use of hospital resources (ASHA, n.d.a).

The DRG-based prospective reimbursement has forced hospitals to control their costs; this reimbursement method has also forced hospitals to minimize the length of inpatient stay to keep the cost of services below the fixed reimbursement amount. This is one of the essential points in this course. However, limiting the length of inpatient stay may contribute to repeat hospital admissions. The system's reform could address many of those preventable conditions and issues. CMS and others have been moving towards these conclusions since 2011, when much of the data on repeat hospital admissions was released (CMS, 2019b).

Reimbursing costs through the DRG-based prospective method is a double-edged sword. It can cut costs. However, a hospital can keep the difference as profit if the total cost of services is less than the DRG-based reimbursement amount. Conversely, a hospital loses money when its costs exceed the prospective reimbursement rate. To avoid losing money, some hospitals discharge patients before being released. Before the prospective payment system changes, each new stay incurs more costs than the hospital collects from the patient (CMS Medicare-Medicaid Coordination Office, 2021). Reducing repeat hospital admissions through accurate, medically necessary, and comprehensive care can improve patient outcomes and reduce overall Medicare and patient cost burden.

Another method for keeping costs below the reimbursed rate is that hospitals may not offer additional specialty or allied health services that could significantly improve patient outcomes. For example, respiratory therapy may be found in any hospital due to artificial oxygen and mechanical ventilation in these facilities. Additionally, PT may be found in acute and inpatient hospital settings because ambulation to and from a bathroom or a patient's fall risk is vital to establishing a patient's current capacity. However, some hospitals may not hire SLPs or OTs. They may employ only a few registered nurses (RN) or licensed practical nurses (LPN) and rely heavily on certified nursing assistants (CNA) or technicians for many patient-related activities.

Fundamentally, there was no incentive to treat a patient comprehensively in the past because they could return later on in the next few weeks and receive more services. Under the prospective reimbursement method, care is discouraged because it drives the repeated hospital admissions problem. Hospital Days of Stay and Costs for a Given DRG Hospitals now have disincentives to discharge patients too quickly. The ACA requires reduced payments to hospitals that incur excessive Medicare readmissions within 30 days of discharge. Readmission can be to the same or another hospital and is related to the medical condition for which the patient was previously hospitalized (CMS Medicare-Medicaid Coordination Office, 2021).

Based on ambulatory payment classifications (APCs) and implemented in 2000, the prospective payment method is associated with Medicare's Outpatient Prospective Payment System for services provided by hospital outpatient departments. The APC divides all outpatient services into more than 300 procedural groups, and reimbursement rates are associated with each APC group. These prices are adjusted for geographic variations in wages. APC reimbursement includes certain drugs, anesthesia, supplies, and recovery room charges in a package price established by Medicare. In January 2008, Medicare implemented the outpatient prospective payment system to pay for facility services, such as nursing, anesthetics, drugs, and recovery care, in freestanding ambulatory surgery centers. The most common procedures performed in these centers are upper gastrointestinal endoscopy, cataract removal and lens replacement, and colonoscopy. Physician services are reimbursed separately under the physician fee schedule based on RBRVS (Zelman et al., 2019).

Medicare reimburses SNFs using Resource Utilization Groups (RUGs), but this approach differs from the Diagnosis-Related Group (DRG) payments used for hospitals. While DRGs are associated with a fixed reimbursement amount for each case, RUG categories assess the overall severity of health conditions that require medical and nursing care in SNFs. The aggregate clinical severity within a facility is referred to as its case mix, which is determined by evaluating the patient's medical and nursing care needs.

Based on this evaluation, each patient is assigned to one of 66 RUGs, and the case-mix composite is then used to establish a fixed per diem reimbursement amount. A higher case-mix score results in increased reimbursement. Adjustments are made to the prospective payment rates to account for variations in wages across different geographic areas, as well as for facility locations in urban versus rural settings. Implemented in October 2000, the Home Health Resource Groups (HHRGs) introduced a prospective payment system for home health care, providing a fixed, predetermined rate for each 60-day episode of care, regardless of the specific services rendered (CMS Medicare-Medicaid Coordination Office, 2021). Thus, all services an HHA provides are bundled under one payment made per patient. An assessment instrument called the Outcomes and Assessment Information Set (OASIS) is used to rate each patient's functional status and level of clinical severity. The assessment measures translate into points, which are then used to determine the patient's HHRG. Payment is then based on the patient's specific HHRG category or classification, where 153 distinct groups are used to classify patients according to their clinical severity, need for rehabilitation therapies, and functional status (ASHA, n.d.b).

As we reflect on how financing healthcare drives healthcare delivery, we see that bundling care costs is vital to keeping prices low for the patients. Currently, America is attempting many different ways to bundle care to keep costs down and ensure that as many Americans can access those healthcare services as possible. The types of bundles we have covered so far include:

1. DRGs bundle inpatient and outpatient ambulatory services
2. RUG levels bundle overall SNF stay patient status
3. APC bundle recovery services
4. HHRGs bundle the home health days of service

Looking at how healthcare bundles services together based on the combination of diagnostic profiles (e.g., the case mix), it is crucial to understand what kind of diagnostic patterns you can expect in each type of site across the continuum of care. We will see how these feed into paying for Medicare-qualifying services for our purposes.

Long-term care (LTC) generally consists of medical and non-medical care provided to individuals with chronic health issues and disabilities that prevent them from doing regular daily tasks. Hence, LTC includes both healthcare and support services for everyday living. It is delivered across various venues, including patients' homes, ALFs, and nursing homes. Also, family members and friends provide most LTC services without getting paid. Medicare does not cover non-medically necessary LTC services (rent or laundry). Thus, costs associated with daily needs can impose a significant burden on families. Medicaid covers several different levels of LTC services, but a person must qualify for Medicaid. Insurance companies offer LTC insurance separately, but most people do not purchase these plans because premiums can be unaffordable (Zelman et al., 2019).

Only certain medically necessary services are approved for Medicare Part A and Part B. These include (CMS, 2024d):

1. The services must be directly related to an active written treatment plan approved by the physician after any needed consultation with the qualified therapist and is based on an initial evaluation performed by a trained therapist before starting therapy services.
2. The resident's condition must require the judgment, knowledge, and skills of a therapist, or the services must be of a level of complexity and sophistication that requires a therapist.
3. The services must be provided with the expectation that the patient's condition will improve in a reasonable and predictable period, or the services must be necessary to establish an effective and safe maintenance program.
4. The services must be considered acceptable standards of medical practice.
5. The services must be reasonable and appropriate for treating the resident's condition, including the requirement that the amount, duration, and frequency of the services must be reasonable. They must be furnished by qualified personnel.

The care plan must identify goals that would benefit the patient functionally. The duration and frequency of services must also be justifiable according to the documented severity of the patient's condition, including a demonstrated change in function and responsiveness to treatment (CMS, 2024d).

The Part A SNF benefit provides coverage for up to 100 days of post-acute care. To be eligible for admission to the SNF under this benefit, the patient must have had a prior stay of at least three days in an acute care hospital. The services offered in the SNF must be directly related to the recent hospitalization or necessary to address a condition that developed after the patient's admission to the SNF (Zelman et al., 2019). Additional criteria for coverage include (Zelman et al., 2019):

1. Transferred to the SNF within 30 days of discharge from the three-day stay
2. Requires the need for skilled care daily, seven days a week, that can only be provided inpatient (CMS Medicare-Medicaid Coordination Office, 2021)

The entire cost of covered services will be paid for by Medicare for days 1-20, with the patient paying for nothing. On the 21st day, coinsurance kicks in, and there is a daily coinsurance cost to an SNF stay that could be more than $150. Beyond 100 days, Medicare pays none of the costs, and the responsibility falls entirely on the patient. Qualified SNF services can include a semi-private room, which is a room that they may share with other patients, meals, skilled nursing care, rehabilitative services (PT, OT, SLP), medical social services, medication, medical supplies and equipment used in the facility, roundtrip ambulance transport to the nearest supplies of medically necessary services unavailable at the SNF, and dietary counseling.

When patients arrive at the SNF, they receive an assessment within the first eight days. They will establish health goals, daily assessments, and skilled care will occur. Assessments, diagnostic tools, and interventional and comprehensive care are necessary for beneficial patient outcomes. While in the SNF, a Medicare patient would be evaluated utilizing the minimum data set (MDS) assessment tool (CMS, 2024d).

The MDS assessment tool provides a thorough overview of a patient's mental and physical conditions and must be completed by the fifth day after admission to an SNF. Typically, a nurse carries out this assessment, though other professionals may contribute to specific specialty areas. For instance, other professionals may assess communication and hearing patterns, cognitive functioning, and oral/nutritional status. It's important to note that the time spent on the MDS assessment does not count towards therapy minutes.

The MDS places a patient into a diagnostic category. The SNF receives a lump sum payment based on that category for all the patient's services. The services are billed through the SNF rather than the individual clinician(s) who rendered the services. Medicare requires the SNF to record assessments done on days 14, 30, 60, and 90 of the covered stay. Any other evaluations needed account for any significant changes in condition until the patient is discharged to home or the 100-day benefit coverage has ended. Assessments commonly evaluate a patient's current physical and mental condition, medical history, medication list, activities of daily living, speech and cognition, and physical limitations. A care plan will be established to provide information on the types of services the patient needs, the types of healthcare professionals that will provide those services, what equipment and supplies are needed, and if an altered diet is required.

If a Medicare beneficiary does not qualify for a Part A stay, their services may instead be covered under Part B through the Medicare fee schedule. For example, if a patient needs post-acute care that extends beyond 100 days, the services rendered after that period could be eligible for Part B coverage (Zelman et al., 2019).

Outpatient services do not require an overnight inpatient stay in an institution of health care delivery, such as a hospital or LTC facility (Zelman et al., 2019). The entire gambit of healthcare-related diagnoses can be found in outpatient care. Use your imagination! What you can think of, there is probably a clinic for it somewhere!

Many hospitals feature EDs and various outpatient service centers, including rehabilitation, outpatient surgery, and specialized clinics. Outpatient services, also known as ambulatory care, encompass diagnostic and therapeutic treatments provided to "walking" (ambulatory) patients. More specifically, "ambulatory care" refers to services delivered to patients in outpatient departments, physicians' offices, and health centers. This term is often used interchangeably with "community medicine," as ambulatory services are designed to serve the local community, ensuring convenient and accessible healthcare options.

Patients may be bounced back and forth from their home to the hospital, have a short stay in an SNF, and then go back to their HHA. Then, sometime later, their status deteriorates again, but this time, they are being bounced from their home/HHA to the hospital, an SNF, and now an ALF. Perhaps they do not receive the most comprehensive assessments and care (for any number of reasons including but not limited to medical errors), and they return to the hospital several times before they finally end up in an SNF. While at the SNF, they continue to deteriorate. They go back and forth to the hospital again and again until one day, they don't return to the SNF at all.

Until changes went into effect in October of 2019, an SNF received a per diem rate and additional reimbursement based on the number of nursing services and/or therapy minutes provided to a patient; this payment system has incentivized some providers or agencies to provide medically unnecessary care. As such, the services provided must be clearly documented and are necessary, reasonable, and individualized to the needs of each patient.

Allied health professionals received specialized training, and their clinical interventions complement the work of physicians and nurses. An allied health professional has received a certificate, associate's, bachelor's, or master's degree, doctoral-level preparation, or post-baccalaureate training in a healthcare science and is responsible for delivering health services. Some key allied health professionals are graduates of programs accredited by their respective professional bodies. For example, such programs train PTs, whose role is to provide care for patients with movement dysfunction. OTs help patients improve their ability to perform tasks in their daily living and work environments and help rehabilitate individuals with physically, mentally, emotionally, or developmentally disabling conditions. These interventions help people become more productive in their workplace and live independently. SLPs treat speech and language problems, and audiologists treat patients with hearing difficulties.

OTs, PTs, and SLPs recommend the frequency and length of sessions they anticipate a patient will need; this is part of the MDS information about the patient's needs combined to determine the patient's RUG level. For PTs and SLPs, there are some rules from the Resident Assessment Instrument (RAI) Manual, Chapter 3, Section 0, that one needs to follow:

• Time spent by the therapist on the initial evaluation or documentation is not included.
• Time spent on subsequent reevaluations as part of the treatment process should be counted.
• Family education is scored and must be documented in the resident's record.
• Treatment minutes are recorded in the MDS in one-minute increments.
• Co-treatment can occur when two clinicians from different disciplines treat the same resident simultaneously. Both disciplines may count the session minutes in full.
• Group treatment involves residents performing the same or similar activities, and a group may consist of no more than four residents. Minutes are allocated by dividing the total session time by four, regardless of attendance.
• Concurrent treatment involves two residents being treated simultaneously without performing the same activities. Both patients must remain in the clinician's line of sight, and the minutes are divided by two after being recorded in the MDS.
• Development of a maintenance program and training for caregivers prior to discharge is required.
• The minutes defining a RUG level represent a minimum requirement, not a maximum. There is no Medicare penalty for exceeding the required minutes in a given week, but patients receiving fewer than the required minutes will be adjusted to the next lower RUG level.
• Providing unnecessary or inappropriate services to meet a specific RUG level or weekly minute requirement is unacceptable.
• Evaluation time does not count toward the RUG level minutes.
• When the prospective payment system for Part A stays in SNFs was established, RUG rates were based on the time clinicians actually spent. Evaluation time was included in calculating these rates, so evaluation minutes are already accounted for and should not be reported separately.
• Administrative guidelines to limit evaluation time may encourage clinicians to maximize therapy time; for example, in an hour-long session, 45 minutes could be counted as therapy if a 15-minute evaluation was conducted. If clinically appropriate, treatment may occur on the same day as the evaluation and count toward therapy minutes.
• If a facility measures productivity solely on treatment minutes recorded in the MDS, it may appear that the SLP's productivity is lower since evaluation time is not included.
• There are important considerations for PT and SLPs conducting evaluations in SNFs for Medicare Part A beneficiaries.
• Clinicians are ethically obligated to provide services they deem appropriate based on their independent clinical judgment.
• Rigid rules governing clinical practice, such as "evaluations must never exceed 15 minutes," are inappropriate. Evaluations should be conducted thoroughly enough to gather the necessary information for diagnosis and care planning.
• Therapists should use their discretion to determine what constitutes evaluation versus treatment.
• Valuable information can be obtained through dynamic observation of the patient engaging in therapeutic activities and through the use of formal or standardized testing.

You must always stay updated on all current rules associated with your license and scope of practice. Additionally, there are a few Medicare considerations to take into account.

SNFs are required to use consolidated billing, which mandates that they provide and bill for all Part A and Part B services rendered to the patient. This system, established by CMS, is designed to prevent double billing for services. For instance, if an SNF does not employ an SLP, it must contract with one to deliver the required services. In this case, the SNF would bill Medicare for the SLP's services, receiving payment based on a negotiated rate. CMS does not set the compensation for contracted employees (CMS Medicare-Medicaid Coordination Office, 2021).

Additionally, in 2014, Congress passed the IMPACT Act 20 to understand better the differences in outcomes and payments among four post-acute care settings: inpatient rehabilitation facilities, HHA, SNFs, and LTC hospitals, and require data standardization across these four post-acute care settings. Currently, each environment has its own distinct assessment tool; for example, SNFs use the MDS. These separate assessment tools do not collect or track data consistently, making evaluating the distinctions between the settings challenging. However, CMS has already begun to change the assessment tools to comply with the mandates of the IMPACT Act. The Act also requires reports examining the possibility of implementing a unified prospective payment system across each setting (CMS, 2024c).

The term advanced practice nurse (APN) is for nurses with education and clinical experience beyond that required of an RN. Four areas of specialization for APNs exist and include certified registered nurse anesthetists (CRNAs), clinical nurse specialists (CNSs), nurse practitioners (NPs), and certified nurse-midwives (CNMs). Nonphysician practitioner (NPP), also called nonphysician clinician and midlevel provider, refers to clinical professionals who practice in many areas where physicians also practice but do not have a medical degree or a doctor of osteopathy degree. NPPs typically include NPs, physician assistants (PAs), and CNMs. NPs may work in primary care, whereas PAs are evenly divided between primary and specialty care. PAs are licensed to perform medical procedures only under the supervision of a physician, off or onsite; they assist physicians in delivering care to patients. Hence, they are an essential adjunct to the practice of primary care physicians. Another area where they provide service is in SNFs. NPs have statutory prescribing authority in many states. Studies have confirmed the efficacy of NPPs, as many studies have demonstrated that they can provide both cost-effective and high-quality medical care (ASHA, n.d.a; ASHA, n.d.b; American Physical Therapy Association [APTA], n.d.).

The nursing department and all NPPs are vital across the continuum of care. For example, nurses can have a vibrant future in acute care at various stages in their careers. Jobs can include administration as a vice-president, regional manager, director, management and supervisory role, and staff in ambulatory care and outpatient services, cardiovascular services, pharmacy, and quality/risk management in their respective buildings. Director, management/supervisory, and staff nursing jobs are available in case management, critical care, emergency services, laboratory services, surgical services, telemetry/medical-surgical nursing, and women's/children's services. Director positions are available for nurses in the dietary/nutrition departments and the rehab Department, working closely with PT, OT, and SLP (ASHA, n.d.a; ASHA, n.d.b; APTA, n.d.).

A vital PT, OT, and nursing collaboration that could help treat patients more comprehensively is through referrals to the acute, outpatient, or acute care SLP. SLPs in acute care provide evaluation and treatment of speech and language problems and swallowing disorders that result from head injury, strokes, respiratory issues, and other medical complications. SLPs are usually expected to be competent in dysphagia management, including videofluoroscopic examinations. Patients typically are seen soon after admission, particularly for swallowing issues, and require daily individual treatment. Session time varies; some patients can tolerate more extended sessions, and some may only be seen for brief periods or more than once per day for short periods. Weekend SLP services for new admissions or seriously involved patients are often provided (ASHA, n.d.a; ASHA, n.d.b; APTA, n.d.).

In general, the age range of acute care patients is:

1. 30-49 years: 11%
2. 50-59 years: 11%
3. 60-69 years: 17%
4. 70-79 years: 27%
5. 80 years and older: 30%

The top 5 primary medical diagnoses of acute care patients are:

1. Cardiovascular attack: 35%
2. Respiratory diseases: 13%
3. Head injury: 6%
4. Hemorrhage/Injury: 5%
5. Central nervous system diseases: 4%.

Typically, the top five functional communication measures scored by SLPs working in acute care hospitals are:

1. Swallowing
2. Spoken Language Comprehension
3. Spoken Language Expression
4. Motor Speech
5. Memory

NPPs, PTs, and OTs have a more significant role in acute care than the other interdisciplinary healthcare staff. SLPs and respiratory therapists are commonly available in acute care but less in rural communities. Respiratory therapists can be found in intensive care units, EDs, neonatal units, and general units of most hospitals.

Many medical specialists may be involved in a patient's care, and referrals may come from these physicians. Based on admitting diagnoses to facilitate the referral process, some facilities will have established "critical pathways." For example, a critical pathway for a stroke patient may include an SLP consult for a swallowing evaluation within the first 24 hours. In this case, the consult is automatically entered into the system upon initiation. SLPs collaborate with many professionals within the hospital system, including nurses, physicians, dietitians, social workers, case managers, and other rehabilitation providers. The role of the SLP may be more consultative in nature in this setting, and the focus is more on patient management rather than direct patient treatment. The case manager, often a nurse or NPP, is vital to the patient care team. The SLP may frequently discuss discharge plans with the case manager as they are developed (ASHA, n.d).

PT and OT use a complex decision-making process to assess and evaluate patients in the acute care setting. They must employ a continual dynamic assessment consisting of communication to gain information, collect and analyze medical information, and apply specialized therapy knowledge and communication to provide information to the patient and their loved ones. Acute care is one in which patients are medically unstable and need treatment.

PTs can use their knowledge about:

1. Pathophysiology symptoms
2. Treatment precautions and contraindications
3. Normal vs. abnormal responses to movement
4. Findings related to red flags
5. Pharmaceutical benefits
6. Adverse effects and interactions

PTs monitor, quickly interpret, and then respond to ensure the safety of their patients. They may use specialized medical knowledge to consider how the movement might compromise medical stability or how medical conditions or medications might affect patients' physiological responses to movement or compound safety issues. Like SLPs in this setting, PTs interact with physicians, nurses, case managers, and others on more than a daily basis.

Post-acute care is a growing and essential health and social service, accounting for more than $2.7 trillion spent on personal health care, almost 15% of total Medicare spending. There are nearly 5,000 member hospitals, health systems, and other health organizations, including 3,300 freestanding post-acute hospitals, post-acute care providers, and post-acute units. Post-acute care settings include inpatient rehabilitation facilities, LTC hospitals, SNFs, and HHAs (American Hospital Association [AHA], 2022). Many job opportunities in acute care are prevalent in post-acute care. However, there will be a higher demand for PT, OT, and SLP-related services in post-acute care. Based on what we've learned so far, we can expect (in post-acute care) for there to be DRGs, RUG levels, APCs, and HHRGs for Medicare Part A/B and HHA qualifying services and ambulatory care.

Rehabilitation hospitals, also referred to as inpatient rehabilitation hospitals, are devoted to rehabilitating patients with various musculoskeletal, neurological, orthopedic, and other medical conditions following their acute medical issues. The industry is primarily made up of independent hospitals that operate these facilities within acute care settings. Inpatient rehabilitation hospitals exist that offer this service in a hospital-like setting but are separate from critical care facilities. However, many inpatient rehabilitation facilities are located within hospitals (Buppert, 2018).

Rehabilitation hospitals were established to address the need for more cost-effective per diem facilities compared to general hospitals. They offer a higher level of professional therapies, such as PT, OT, and SLP, which are not typically available in SNFs. These hospitals bill at rates approved by Medicare and must comply with specific requirements set by the Medicare administration. Medicare allows each individual a lifetime stay of up to 100 days in a rehabilitation hospital.

Access to a rehabilitation hospital is contingent upon a prior inpatient stay at a general hospital for a specified duration. During this stay, the general hospital assesses the patient to determine the potential benefits of rehabilitation services. If the patient meets the criteria for a certain level of therapy, a positive evaluation is made, and a report detailing the patient's needs is forwarded to the rehabilitation hospital. The hospital then uses its discretion to decide on the patient's admission. If the patient is accepted, their medical records and a recommended treatment plan, which includes daily therapy sessions, are also provided (Buppert, 2018).

Overall, across the continuum of care, OTs address the need for rehabilitation following an impairment or injury. When planning treatment, OTs address the physical, psychosocial, cognitive, and environmental needs involved.

OT/OTA services in adult rehabilitation may take various forms (Buppert, 2018). For example:

1. Increasing the quality of life for someone with cancer by providing anxiety and stress reduction methods, engaging them in meaningful occupations, and suggesting fatigue management strategies.
2. Working with adults with autism in rehabilitation programs to promote community participation through instruction on social skills and successful relationships.
3. Coaching a person with a leg amputation on how to put on and take off a myoelectrically controlled limb through functional use training.
4. Implementing new technology like speech-to-text software and different types of video games.
5. Assisting with prescriptions for pressure sore prevention and sitting cushions for those with paraplegia.
6. Using telehealth as a service delivery to communicate with those living in rural areas.
7. Working with adults who have had a stroke to regain range of motion, strength, and endurance.

ALFs and ILFs have essentially the same departments found in rehab hospitals or SNFs; however, round-the-clock monitoring is not required. ALF/ILFs may require more personal care assistants, CNAs, orderlies, and personal attendants found in other settings. In addition to the skilled help they receive from trained CNAs, senior residents appreciate all the activities available in ALFs. An activities director ensures residents have plenty to do to enjoy their stay. Offsite trips to museums, theaters, and shopping are everyday activities for residents. Sometimes, they arrange bingo games, yoga, exercise groups, karaoke and movie events, and volunteer visits to provide entertainment for residents. The activity director works in the office with other personnel, such as the director or administrator, intake staff, and marketing professionals (Buppert, 2018).

Reducing readmissions is a national priority for providers, payers, and policymakers seeking to achieve Triple Aim objectives, including improving health and providing enhanced care at a lower cost. Hospital readmissions are frequent, highly variable, and costly across providers and geographic locations. Significant evidence has shown the major inconsistencies with transitioning out of the hospital and into the subsequent care setting. It can be rushed, unsafe for the patient, ineffective, and confusing. These processes should be improved to make the healthcare system efficient, safe, and effective. It is necessary to reorganize operations and services to reduce readmissions and provide accountable care (Buppert, 2018).

The causes of hospital readmissions are complex and can vary significantly across different institutions. Historically, about 20% of all Medicare discharges result in a readmission within 30 days. The Medicare Payment Advisory Commission estimates that approximately 12% of these readmissions could be avoided (Rau, 2019).

If Medicare could prevent just 10% of these readmissions, it could save around $1 billion. As a result, reducing hospital readmissions has become a national priority. In 2008, the Medicare Payment Advisory Commission recommended to Congress that CMS start confidentially reporting readmission rates and resource usage to hospitals and physicians (Rau, 2019).

Since October 1, 2012, the Hospital Readmissions Reduction Program (HRRP) has mandated that CMS reduce payments to participating hospitals with excessive readmissions. The penalty imposed is a percentage of the total Medicare payments received by the hospital, with maximum penalties set at 1% for 2013, 2% for 2014, and 3% for 2015. The penalties levied against hospitals translate into savings for CMS. According to the ACA, these savings are deposited into the Medicare Hospital Insurance Trust Fund, which enhances benefits and services for all Medicare beneficiaries, safeguards guaranteed benefits, and lowers Part B premiums (Rau, 2019).

Initially, the HRRP targeted conditions such as heart failure, acute myocardial infarction, and pneumonia. In 2015, this list expanded to include elective total hip arthroplasty, acute exacerbations of chronic obstructive pulmonary disease (COPD), and total knee arthroplasty. Conditions are identified based on the primary discharge diagnosis rather than the DRG assigned to the hospitalization. Furthermore, hospitals must have at least 25 initial hospitalizations for a diagnosis to be eligible for measurement. The HRRP continues to refine its policies, including adjustments to the methodology for calculating the hospital readmission adjustment factor and accounting for planned readmissions (Rau, 2019).

The HRRP, established by the ACA, is a Medicare value-based purchasing initiative that reduces payments to hospitals with excessive readmissions. This program aligns with the national goal of enhancing healthcare for Americans by connecting payment to the quality of hospital care. By linking service payments to care quality, the HRRP incentivizes hospitals to improve care coordination and communication, encouraging greater involvement of patients and their caregivers in post-discharge planning.

The program includes measures for conditions and procedures that significantly impact the lives of many Medicare beneficiaries. Together with the Hospital Value-Based Purchasing Program and the Hospital-Acquired Condition Reduction Program, the HRRP plays a crucial role in increasing transparency, quality measurement, and improvement within value-based payment systems in inpatient care. Research indicates that hospital readmission rates vary significantly across the nation, and by incentivizing providers to reduce excess readmissions, the HRRP not only enhances the quality of care but also saves taxpayer dollars (Rau, 2019).

Applicable hospitals under HRRP are defined in section 1886(d)(1)(B) of the Social Security Act. Maryland hospitals are included under the program in readmission measure calculations. Still, they're waived from payment reductions because they participate in the Maryland All-Payer Model. More information about Maryland hospitals can be found in section 1886(q)(5)(C) of the Social Security Act. They use the excess readmission ratio (ERR) to assess hospital performance, which measures a hospital's relative performance and is the ratio of predicted-to-expected readmissions. An ERR is calculated for each condition and procedure included in the program.

CMS has indicated that the following six conditions/diagnoses are significantly correlated with a repeat hospital admission (Rau, 2019):

1. Acute myocardial infarction or heart attack
2. COPD
3. Pneumonia
4. Heart failure
5. Coronary artery bypass graft (CABG) surgery
6. Elective primary total hip arthroplasty and total knee arthroplasty

Let's look back at many diagnostic profiles expected to reside in an SNF. We know that COPD and hip issues account for more than 158,000 Medicare-qualifying admissions in any given year. Reducing repeat hospital admissions rates for Medicare beneficiaries by providing higher quality and more comprehensive care could save millions of dollars annually for Medicare and patients.

Remember that the new admission must have occurred within the most recent 30 days of the last discharge to count as readmission. To qualify, patients can be readmitted to the same hospital or another applicable acute care hospital for any reason. Readmissions to any appropriate critical care hospital are counted, no matter the principal diagnosis. The measures do not include some planned readmissions (Rau, 2019).

CMS sends confidential hospital-specific reports to hospitals annually and gives hospitals 30 days to review the data, submit questions regarding their results, and request corrections. The review and corrections process is specific only to discrepancies related to calculating the payment adjustment factor and component results. After the review and corrections period, CMS will publicly report hospitals' HRRP data (Rau, 2019).

Based on claims data, the 30-day risk-standardized readmission rate for hospitals has been portrayed as a highly actionable and reliable measure of care quality. It has been utilized to render financial penalties for poor outcomes. Hospital 30-day risk-standardized readmission data was reported by CMS beginning in 2010 (Rau, 2019).

Compared to those who do not reside in them, residents who do reside in residential aged care facilities (RACFs) have a higher proportion of ED visits, readmission to the hospital, and increased length of stay in both ED and hospitals. Reasons for ED transfer include cardiovascular and respiratory illness, falls and fall-related fractures, altered mental state, and device-related complications such as indwelling catheters. The consequences of transferring older people living in RACFs to the ED and hospital admission are significant, with an increased risk of medication errors, delirium, and other iatrogenic events such as falls, pressure injuries, deconditioning, and death.

When older residents in RACFs require medical care, it disrupts the continuity of care and necessitates coordination across primary, tertiary, community, and rehabilitation health services. In cases of acute illness, transfers to an ED may occur with inadequate handover, often lacking thorough documentation of the patient's current symptoms or conditions. Additionally, gathering a comprehensive medical history can be challenging due to cognitive issues.

Regrettably, many older residents frequently transition between acute and LTC settings. Studies indicate that managing ill residents within RACFs can lead to outcomes that are similar to or better than those achieved in hospitals. When evaluating the need for hospitalization for older adults, it is essential to ensure that the benefits outweigh the associated risks. The additional risks of hospitalization—especially when there is no significant potential benefit for the resident's clinical status or quality of life—highlight the need for exploring new or alternative care models (Rau, 2019).

Powerful incentives can create much-needed action and attention. However, most incentives, technical assistance, and new financing have focused providers and communities on reducing readmissions for the Medicare fee-for-service population. Many of the tools and best practices for reducing readmissions were developed based on research literature insights and geriatric health service, making it reasonable that many readmission reduction initiatives target Medicare beneficiaries or conditions on the CMS readmission penalty list only. However, all-payer data analyses show that the adult, non-obstetric Medicaid population has readmission rates higher than those on Medicare fee-for-service programs. Hospitals are facing pressure to reduce Medicaid readmissions as payers and policymakers focus on the unique needs of newly enrolled and dually eligible patients.

In October 2019, Medicare cut payments to 2,583 hospitals as part of the ACA's ongoing initiative to financially motivate hospitals to reduce the number of patients who are readmitted within 30 days. This initiative is known as the HRRP. The penalties, which Medicare estimates will cost hospitals $563 million over the course of a year, reflect a trend established in previous years. Among the 3,129 general hospitals assessed under the HRRP, 83% faced penalties that will be deducted from Medicare payments for patient stays throughout the fiscal year.

While these penalties have been in place since 2012, there is ongoing debate about their impact on patient safety. On the positive side, they have prompted hospitals to enhance post-discharge support, helping patients secure medications and follow-up appointments. However, concerns have been raised by the hospital industry and some academics that these financial penalties may lead some hospitals to avoid readmitting patients who need further inpatient care. Notably, research indicates that the HRRP does not necessarily reduce mortality rates (Qiu et al., 2022).

It's important to note that Medicare tracks patient readmissions within 30 days, regardless of whether the patient returns to the original hospital. In such cases, the penalty is applied to the first hospital.

A study examining the overall effectiveness of the HRRP identified four key findings. First, readmission rates for both targeted and nontargeted conditions began to decline more rapidly starting in April 2010, following the passage of the ACA. Although the decline slowed, readmission rates continued to decrease from October 2012 through May 2015. Second, the ACA was linked to a more significant drop in readmission rates for targeted conditions compared to nontargeted ones. Third, there was an increase in the use of observation services. Finally, the study found no significant correlation between the increased use of observation services and reduced readmission rates during the implementation period.

Following the passage of the ACA, readmission rates decreased, suggesting that changes in care organizations prompted by the HRRP may be effective. While this decline could be linked to the HRRP, the initially higher readmission rates for targeted conditions likely made it easier to achieve reductions compared to nontargeted conditions, contributing to the more pronounced decrease. In light of this, some policymakers and the Medicare Payment Advisory Commission have proposed expanding the HRRP to encompass all clinical situations. Such an expansion could incentivize hospitals to better align with the program's objectives, more aggressively reduce readmissions, and streamline the process by implementing a single readmission measure (Rau, 2019).

To illustrate the overall impact of Medicare's payment system on a patient's care, let's look at a fictional case study. In this instance, we will, again, imagine a female patient with child-onset diabetes mellitus. In her 40s, she had issues with consistently maintaining employment and has been receiving Social Security and Medicaid benefits for several years. At 43 years old, she was diagnosed with ESRD. After the disease progressed, this patient required more professional levels of care, and she relocated to an SNF.

Upon admission to the SNF, this patient received an assessment that determined her metabolic, endocrine, and epidermal needs required immediate care. The patient had difficulty ambulating a distance that could maintain a sufficient level of exercise for her body. With chronic renal dysfunction, her excretory functions were inconsistent. She had difficulty maintaining electrolyte balance in combination with the glucose/insulin imbalance. The physician and NP led the nursing team. The team coordinated meals, ambulation, peripheral epidermal ulceration, edema, and respiratory care with the PT and OT teams. Making appropriate referrals, the interdisciplinary team coordinated the patient's care to reduce the swelling, improve circulation, restore the patient's epidermal barrier protection, regulate excretory functions, and re-establish metabolic and endocrine balance. Under the plan of care related to the primary diagnoses associated with admission to the SNF (e.g., diabetes mellitus, chronic kidney disease, and reduced ambulatory capacity), Medicare Part A would cover these qualifying medical services and all the associated equipment.

An example of possible medical equipment associated with treating this set of conditions is this female patient could have significant respiratory dysfunction associated with the loss of ambulation, increased peripheral edema, electrolyte imbalance, and chronic renal dysfunction. This patient likely has gastrointestinal reflux and dysphagia, as these comorbidities are associated with chronic metabolic and renal imbalances. As such, this patient may have aspiration, aspiration pneumonia, or aspiration pneumonitis in their patient history. They could require artificial oxygen delivery via a mask or nasal cannula. At later stages, they could require the use of mechanical ventilation. These forms of equipment and all the nursing, PT, OT, and SLP services would also be covered under Medicare Part A.

Maintaining this patient's mobility, reducing their respiratory dysfunction, and stabilizing their metabolic and renal issues are fundamental to improving their outcomes. The NP and physician can coordinate the care of this patient's diagnostic profile from the overall view. They can interpret the pathophysiological biomarkers of diabetes mellitus, ESRD, gastroesophageal reflux disease (GERD), and dysphagia. This patient began to receive care and continued on this path for several weeks.

Then, the patient took a turn for the worse. The culmination of comorbidities was beginning to take its toll on the cardiovascular system, particularly when the edema began. The patient's blood pressure was rising insidiously. While still in the mild to moderate range, the patient suffered a myocardial infarction and went to the hospital. The patient returned two weeks later, having had video fluoroscopy for her dysphagia treatments for her respiratory distress, and the patient was stabilized. The patient had been given a tube in her stomach to get nourishment, oxygen via nasal cannula, and a pacemaker had been placed. She had a co-diagnosis of hypertension.

To address the preventable conditions that might further deteriorate this patient's conditions, the physician and interdisciplinary team coordinated the SLP to work with respiratory and gastrointestinal departments to manage the patient's dysphagia. Dysphagia can increase hospital admission rates and mortality. The SLP worked with the nursing team to coordinate the delivery of medications to prevent further aspiration risks and the delivery of nutrients via a tube placed in the gastrointestinal tract. The nursing team coordinated care with the PT, OT, and respiratory to manage the patient's decubitus ulcers that were developing due to body temperature regulation issues, electrolyte imbalance, and metabolic and renal dysfunctions. The hospital administrator and hospital management team had a sufficient supply of technicians and technologists available to provide a level of care to the patients that kept community-acquired infections to a minimum, activity to a safe and productive level, as well as an environment of compassion that motivated this patient to work towards an improved outcome.

To manage this patient's dysphagia, the SLP consulted the physician and NP to discuss bringing in a fiberoptic endoscopic examination of swallowing (FEES) assessment to manage the patient's GERD and dysphagia. The main components of GERD and dysphagia are not coated by barium in a modified barium swallow; therefore, a FEES is necessary to establish the scope of swallowing issues related to these diagnoses.

Of course, in the end, this patient does have ESRD and chronic diabetes mellitus. In many cases, this patient's future will include some level of cognitive impairment or possibly AD; diabetes mellitus patients are 4x more likely to develop AD than the general population. Indeed, this patient may not return home and establish their daily lives again; however, they can continue to live in dignity and grace for as long as possible. The importance of delivering quality and compassionate care is discussed in another course, Business Management for the Healthcare Professional. This example demonstrates how those ideas can be seen in the skilled nursing setting.

However, let's go back and assume this patient did not receive the most comprehensive care. This medium type of language is being used because underserved healthcare is the more significant issue, rather than a lack of care at all. Most often, healthcare practitioners, clinicians, and allied health professionals are doing their best, given the resources and time afforded to them. This is well understood. Here, let us imagine that the situation deteriorates for this patient due to many factors contributing to an underserved level of care. Some of these factors are not preventable, and some are. In this scenario, the patient will deteriorate due to common preventable and associated conditions contributing to repeat hospital admissions in this group overall.

For example, let's say this patient was assessed, and a care plan was established at the SNF as described. The patient could do the work necessary to maintain their quality of life and show some improvements. Then, at around 100 days, the Medicare reimbursements ran out. This patient did not have any other means to continue with that level of care and had to be discharged home and receive HHA, Medicaid, and Social Security. This patient's condition returned, and their access to quality care was reduced. She couldn't access the interdisciplinary and case management teams to make a difference in her condition. The HHA in her area was small and had an RN who would come to assess her condition. While on HHA, she is considered on Medicare Part A. Accessing therapy services under this condition is difficult, as these are often covered under Medicare Part B. Due to no management of her comorbidities or primary diagnostic profile, she went back and forth to her hospital and home several times with aspiration, aspiration pneumonia, falls, ulcers, and additional tachycardic events. Once again, she was admitted to an SNF with an acute diagnosis of chronic bronchitis and a fall, secondary diagnoses of AD, and tertiary diagnoses, ESRD, diabetes mellitus, peripheral edema, peripheral neuropathy, retinopathy, and dysphagia with aspiration. The new diagnosis of chronic bronchitis and a fall makes this a new case and is not documented as a repeat hospital admission.

The new diagnosis of chronic bronchitis and a fall requires readmission to the SNF and all new assessments to establish the patient's current condition. Once again, there is a chance to change this patient's outcome if the interdisciplinary team can work with outpatient and primary care once this patient is discharged at 100 days. In many instances, this patient can be returned to a functioning level and able to maintain a level of dignity and grace they've earned in their lives. However, just as frequently, the revolving door of the hospital to home to SNF to home health to the hospital to SNF to the hospital to the morgue can occur.

1. Medicare is one of the largest sources of public health insurance in the United States, serving older adults, people with disabilities, and those with ESRD. Managed by the CMS, another division within the Department of Health and Human Services, Medicare offers coverage for hospital care, post-discharge nursing care, hospice care, outpatient services, and prescription drugs.
2. Medicaid, the country's third-largest source of health insurance, provides coverage for low-income adults, children, older people, and individuals with disabilities. This program is also the largest LTC provider for older Americans and individuals with disabilities.
3. Because the retrospective method was based on costs directly related to the length of stay, services rendered, and the cost of providing the services, providers had no incentive to control costs. Services were rendered indiscriminately because healthcare institutions could increase profits by increasing costs. Because of the perverse financial incentives inherent in retrospective cost-based reimbursement, it has been primarily replaced by prospective reimbursement methods.
4. In contrast to retrospective reimbursement, where actual costs are used to determine the amount paid to providers, prospective reimbursement uses specific pre-established criteria to determine the reimbursement amount in advance. Medicare has been using the prospective payment system to reimburse inpatient hospital acute care services under Medicare Part A since 1983.
5. Medicare is a health insurance program for individuals over the age of 65. It is also available for some individuals with certain disabilities and all ages for ESRD.
6. Medicare Part A helps cover inpatient care in hospitals, including critical access hospitals and SNFs (not custodial or LTC). It also helps cover hospice care and some home health care. Beneficiaries must meet certain conditions to get these benefits.
7. Medicare Part B helps cover doctors' services and outpatient care. It also covers some other medical services that Part A does not cover, such as physical and OT and some home health care services. Part B helps pay for these covered services and supplies when medically necessary.
8. SNFs that provide services (e.g., nursing, PT, OT, and SLP services) to Medicare beneficiaries are paid under a prospective payment system through Part A of the Medicare benefit. If a patient requires services based on their clinical characteristics, Medicare requires SNFs to provide them regardless of whether the services are covered under Part A or Part B of the program.
9. Reimbursing costs through the DRG-based prospective method is a double-edged sword. It can cut costs. However, if the total cost of services is less than the DRG-based reimbursement amount, a hospital can keep the difference as profit. Conversely, a hospital loses money when its costs exceed the prospective reimbursement rate. To avoid losing money, some hospitals discharged patients before they were ready to be discharged. The patient could come back to the hospital sometime later in the past. Before the prospective payment system changes, each new stay incurred more costs than the hospital collected from the patient. Reducing repeat hospital admissions through accurate, medically necessary, and comprehensive care can improve patient outcomes and reduce overall Medicare and patient cost burden.
10. Another method for keeping costs below the reimbursed rate; hospitals may not offer additional specialty or allied health services that could significantly improve patient outcomes.
11. Fundamentally, there was no incentive to treat a patient comprehensively in the past because they could return later on in the next few weeks and receive more services. Under the prospective reimbursement method, care is discouraged because it drives the repeated hospital admissions problem.
12. The ACA requires reduced payments to hospitals that incur excessive Medicare readmissions within 30 days of discharge. Readmission can be to the same or another hospital and is related to the medical condition for which the patient was previously hospitalized.
13. CMS includes the following six condition/procedure-specific 30-day risk-standardized unplanned readmission measures in the program: heart attack, COPD, heart failure, pneumonia, CABG Surgery, and total hip arthroplasty and total knee arthroplasty.
14. Medicare cut payments to 2,583 hospitals in 2019, continuing the ACA's campaign to financially pressure hospitals to reduce readmissions. The severity and broad application of the penalties, costing nearly $600 million yearly, follows the trend of the previous few years.
15. Medicare counts the readmission of patients who return to a hospital within 30 days, even if that hospital did not initially treat them. In those cases, the penalty is applied to the first hospital.

Reducing repeat hospital admissions is a significant initiative in healthcare. The savvy medical or allied health professional who evaluates how these external forces can shape their career will find themselves ahead of the pack! Having an overall understanding of the workings of the healthcare machine (e.g., Medicare, Medicaid, and Healthcare Financing in America), which provides access to care, could give the savvy medical or allied health professional an advantage. This knowledge can improve patient outcomes, help professionals have higher job satisfaction, and propel a career forward through understanding and action.

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