Is subacute care feasible? - Special Section: Subacute Care

Healthcare Financial Management, Oct, 1995 by Wilkes L. Kothmann

As healthcare executives attempt to control costs and enhance revenue in an increasingly competitive market, many are considering converting acute care units into subacute care units (Medicare-certified skilled nursing units). Such a conversion can help control costs by providing care in a less expensive setting that is appropriate for patients who require less intensive care than traditional acute care. In addition, converting an acute care unit into a subacute care unit can optimize reimbursement for Medicare patients.

A detailed feasibility analysis that addresses clinical, regulatory, space, and financial considerations should be conducted before healthcare executives decide to convert acute care beds into subacute care beds. Only after a feasibility analysis is performed can healthcare executives determine whether creating a subacute care unit is a realistic, beneficial option.

As healthcare costs rise and traditional fee-for-service payment becomes less prevalent, healthcare organizations and systems are challenged both to control costs and to increase revenue. One way to meet this challenge is by diversifying to offer non-acute-care programs.

One diversification option that is receiving much attention is subacute care units. The term "subacute" is used to describe care that is less intensive than traditional acute care, but more intensive than traditional long term care. Although this article focuses on hospital-based subacute care units, subacute care also can be provided in free-standing facilities.

Most subacute care units are certified by Medicare as skilled nursing programs. In addition, some states require a subacute care unit to be licensed as a nursing facility. The Federal government does not define or separately reimburse subacute care; currently, subacute care is reimbursed under Medicare skilled nursing reimbursement regulations. However, some managed care organizations and state governments acknowledge and reimburse this level of care.

The opportunity to enhance Medicare reimbursement is a significant potential benefit of providing subacute care because a significant percentage of subacute care patients are Medicare recipients. Medicare reimburses subacute care units on the basis of cost, rather than on a prospective basis. All reasonable and necessary costs relating to the unit are reimbursed based on Medicare utilization. These costs include direct expenses, overhead costs, capital costs, and ancillary services costs. Subacute care units allow hospitals to more effectively manage lengths of stay of some Medicare patients by providing an appropriate "step-down" level of care.

By enhancing payment and providing a much-needed service, subacute care units significantly can improve a provider's financial position and community reputation. Subacute care units provide hospitals additional revenue by using excess capacity, by providing a distinct unit to which overhead expenses can be allocated, by reducing Medicare and other patients' acute care lengths of stay, and by providing post-acute care services to help a healthcare organization or system provide care all along the continuum.

Despite subacute care's potential benefits, it is not a viable option for every organization. A detailed feasibility analysis is required to determine whether converting an acute care unit into a subacute care unit is feasible and beneficial. Such an analysis should address the clinical, space, regulatory, and financial considerations unique to subacute care. Each component of the feasibility analysis is critical and must be completed objectively. If healthcare executives decide to move ahead with the conversion, the feasibility analysis will provide information needed to determine the next steps in creating a subacute care unit.

Clinical considerations

The many benefits that could be derived from a well-managed subacute care unit will not materialize if the patient population that would be served by the unit is too small. In addition, a subacute care unit will not provide benefit if physicians do not support the unit and consistently apply its admission criteria. A medical record review and physician interviews should help determine the clinical need for a subacute care unit and encourage physician support of the unit.

Medical record review. The first step in the feasibility analysis is to determine how many beds will be needed, based on the patient population. The number of beds needed can be determined by thorough review of inpatients over the previous year. Assuming the hospital's executives have decided that Medicare patients will be the referral base for the subacute care unit, the hospital should determine which Medicare diagnosis-related groups will be included in the review.

The medical record review should include identification of the following conditions and procedures: skin ulcers, heart failure, digestive diseases, strokes, respiratory diseases, major joint and hip procedures, and mechanical ventilation. Patients being treated for these conditions or undergoing these procedures often] can be treated in subacute care units. If no subacute care unit is available, these patients may have unnecessarily long acute care lengths of stay before they can be discharged to their homes, to traditional nursing homes, or to rehabilitation programs.