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Hospitalist Savings Shift To Other Providers, Cost Medicare More Than $1.1 Billion A Year

August 2, 2011

First national study of hospitalists’ effect on costs and post-discharge medical usage underscores problems with continuity of care

Inpatients cared for by hospitalists have higher Medicare costs in the 30 days after discharge than those whose personal physicians oversee their care. This is partly because hospitalists’ patients are more likely to be discharged to a rehabilitation or nursing facility than to their homes and more likely to have subsequent emergency room visits and readmissions. Such “cost shifting” translates to more than $1.1 billion in Medicare expenses annually, contradicting beliefs that hospitalist care reduces overall costs.

These are the primary findings of the first assessment of hospitalists’ impact on direct hospital costs, post-discharge medical utilization and related expenses. The study, which was conducted by researchers from the University of Texas Medical Branch (UTMB) at Galveston, is published in the August 2nd issue of Annals of Internal Medicine.

Using a sample of nearly 60,000 hospital admissions at roughly 450 hospitals nationwide, researchers found that care by hospitalists ““ hospital-based general physicians who coordinate an inpatient’s care ““ was associated with shorter stays (0.64 fewer days) and lower hospital charges ($280) than for inpatients seen by a primary care physician.

However, savings were offset by post-discharge Medicare costs roughly $330 higher for patients cared for by hospitalists. Rehospitalization accounted for 59 percent of the post-discharge costs, with nursing facilities and other outpatient providers accounting for 19 and 22 percent, respectively.

“Applying these findings to the approximately 25 percent of Medicare admissions cared for by hospitalists results in additional Medicare costs of more than $1.1 billion each year,” said lead author Yong-Fang Kuo, Ph.D., associate professor, Department of Internal Medicine, Division of Geriatric Medicine at UTMB. “This estimate, though staggering, is actually conservative, because Medicare reimbursement does not include other payers’ payments, out-of-pocket expenses and co-pays.”

The findings, which also indicate that pressure to reduce length of hospital stays may promote early discharge to other health care facilities rather than home, add to concerns regarding hospitalists’ potentially adverse effects on continuity of care.

“Hospitalists are typically employed or subsidized by hospitals, which may make them more susceptible to behaviors that promote cost shifting,” said Kuo. “Bundling payments based on episodes of care ““ including post-acute care and follow up after discharge ““ may reduce these incentives, clarify the cost impact of different models of hospital care, and improve communication and continuity of care among health providers.”

The study comes on the heels of Medicare’s plans to establish a performance measure that would make hospitals accountable not only for the cost of care they provide, but also the cost of services performed by other health care providers in the 90 days after a Medicare patient leaves the hospital.

“If enacted, the new Medicare hospital performance measure represents an important step toward reducing unnecessary Medicare spending and addressing an area of serious concern underscored by this study ““ are patients being discharged from the hospital too early?,” said Kuo.

Kuo noted that the study period of 2001 ““ 2006 offers a look at hospitalist care and outcomes during a time of rapid growth in the field. The authors saw no change during the five years, indicating that it is unlikely significant improvements have occurred in recent years.

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