And it means assuring that facilities selected for their networks have low readmission rates and high-quality track records.

Those were some of the messages from three speakers at the annual meeting of the Society of Hospital Medicine who discussed “Moving from Fee for Service to Value-Based Purchasing and Bundled Payment Models.”

“We have to look outside the four walls of the hospital in the future if we want to continue to make health care better,” said Dr. Winthrop Whitcomb, chief medical officer for the consulting group Remedy Partners of Darien, Conn.

That will be especially true as providers move to bundled payment models, and begin to absorb risk for any allowable costs incurred during 30, 60, or 90 days post-discharge for various diagnosis-related groups.

In one 90-day bundled model analyzed by Remedy for a number of hospitals, Dr. Whitcomb said, the anchor admission absorbed only 33% of the episode’s spending while readmissions accounted for 17%, skilled nursing facility stays accounted for 22%, and inpatient rehabilitation facilities and long-term care hospitals 4%, collectively more than the anchor admission.

“Patients who are hospitalized and then go home, with or without a home health agency, incur $20,000 over a 90-day episode,” he said. “However, if they go to a skilled nursing facility, it’s two times that.” And while the skilled nursing facility group “may be sicker, there’s an overlap here, and the trick is to figure out which of these patients who go to these higher cost settings can actually go home safely.”

Dr. Whitcomb emphasized “three core skills” hospitalists must master in a bundled payment model:

• More focus on palliative care discussions when appropriate.

• More emphasis on hospitalists’ involvement in patients’ functional assessments to determine the appropriate post acute setting.

• Better “transitionalist” services to manage care prior to admission and after discharge, such as in skilled nursing facilities, home care services, or post-discharge clinics.

The federal Medicare Spending Per Beneficiary measure can mean a significant reward or pay cut for all hospitals, apart from bundled programs. The Medicare Spending Per Beneficiary rate affects 25% of the score used to calculate a hospital’s incentive payment in Medicare’s value-based purchasing program, which this fiscal year amounts to 44 cents of every $100 in Medicare reimbursement at risk, but next year rises to 50 cents.

The hospitalist also should take a more proactive role in recommending certain nursing homes and other post-discharge services over others based on outcomes, emphasized Dr. Robert Bessler, founder and CEO of Sound Physicians , a Tacoma, Wash.–based hospital physicians’ group.

“We moved our patients from the bad home health agency to the good one, without doing anything else, and saved $1,265 per episode, plus eight patients don’t get readmitted,” Dr. Bessler said. Similar quality information should inform decisions about which nursing homes these patients should be discharged to, “not where case management last got donuts, or who has a bed available, but who has good outcomes,” he said.

He added that the system can save $13,000 per patient, with four less readmissions, just by using the data available. “This is what’s making real winners and losers in the nursing home space, competition for free market at its best,” he said.

The potential for savings is huge because half of every healthcare dollar spent happens within 90 days of a hospital stay and in those 90 days, in all settings, there is large variation nationally.

“The stat that blew me away the first time I heard it was the skilled nursing facility bed days per 1,000 patients for seniors in Kaiser in California is about 600. However, if you’re in fee for service anywhere in the country, in Ohio or South Florida, the average skilled nursing facility bed days per 1,000 seniors is 2,000,” Dr. Bessler said.

The hospitalist also can be the arbiter of quality, based on data. Although Medicare requires hospitals list three post-acute facilities that they don’t own for patients making decisions, they can name facilities and services with which they have had good experiences.

Several speakers noted that case managers often misunderstand this, thinking they’re protecting their patients by giving them a wide range of choices. But they may in fact be hurting them by not giving them informed information about the quality levels of those facilities.

Medicare’s five star-rating system for nursing homes can inform those choices, said Dr. George Mitri , chief medical officer for U.S. Acute Care Solutions and former vice president of care coordination and hospital medicine for Aultman Hospital in Canton, Ohio.

Across the country, he said, 40% of the 1.4 million patients who are in nursing homes are in facilities with only one or two stars. “That’s 560,000 patients who are in nursing homes that are providing poor quality, and we don’t know it.”

Those nursing homes are more likely to cost more money through readmissions and other problems affecting the bundled payment, Dr. Mitri said. And, he said, “if you’re a one-star, you’re actually causing harm to the patient.”

As hospitalists look to gauge quality of post-discharge care, Dr. Mitri said they should also look at quality ratings for home health agencies and rehabilitation facilities, where there also is wide variation.

Another way that hospitalists can reduce spending and maximize bundled savings is by paying more attention to documentation and coding through data, Dr. Mitri said.

That means, for example, making sure that a stroke case in diagnosis-related group 64 is not incorrectly coded as a lower-paying 65. “If you have 64s (being coded as) 65s, you’re going to lose money, because you’re using more resources than was intended. If data is king, documentation is queen,” he said.

Using Medicare’s bundled payment model for stroke, Dr. Mitri said, his former hospital “narrowed its network” and was able to “cut down the cost because we cut down length of stay and have better expectations from nursing facilities about what they’re going to do with our patients.”