Hospital Postacute Care Referral Networks: Is Referral Concentration Associated with Medicare-Style Bundled Payments?

To evaluate whether Medicare-style bundled payments are lower or higher for beneficiaries discharged from hospitals with postacute care (PAC) referrals concentrated among fewer PAC providers.

Medicare Part A and Part B claim (2008-2012) for all beneficiaries residing in any of 17 market areas: the Provider of Service file, the Healthcare Cost Report Information System, and the Dartmouth Atlas.

An observational study in which hospitals were distinguished according to PAC referral concentration, which is the tendency to utilize fewer rather than more PAC providers. We tested the hypothesis that higher referral concentration would be associated with total Medicare bundled payments.

The data represent a convenience sample of market areas that were defined by the locations of grantees from the ONC Beacon Community Program.

The four most-used PAC providers accounted for an average of 60 percent of patients discharged from hospitals in the sample. Regression analysis suggested that higher referral concentration was associated with lower Medicare costs per bundle.

Hospitals that tend to use fewer PAC providers may lead to lower costs for payers such as Medicare. The study results reinforce the importance of limited networks for PAC services under bundling arrangements for hospital and PAC payments.