Hartford Business Journal

www.HartfordBusiness.com • April 8, 2019 • Hartford Business Journal 15 of the ongoing debate. In August, a team of economists from MIT, Stanford and the University of Chi- cago, after analyzing 16 years of Medicare data, concluded that LTCHs' high costs simply haven't justified their patient outcomes, and that many long-term care hospital patients could be served just as well in a skilled-nursing facility. "Patients discharged to an LTCH owe more money out of pocket, and we find no evidence that they spend less time in institutional care or have better mortality outcomes as a result," read the study titled, "A Case Study in Waste," published by the National Bureau of Economic Research (NBER). Therefore LTCHs, despite being a small piece of the overall healthcare system, could represent a pocket of financial waste, the study said. "Taken together, our findings indi- cate that Medicare could save $4.6 bil- lion per year with no harm to patients by not allowing for discharges to LTCHs," the authors wrote. Not so fast, Gaylord's Kyriacou and LaBarbera said. They don't dispute that the services they provide cost more, but they argue that the NBER authors did not ac- count for the fact that their patients are much sicker on average compared to patients at skilled-nursing facilities. "That was our biggest beef," LaBar- bera said. "They made no adjustments for [how sick our patients are]." Kyriacou helped lead a substantial rebuttal to that national report, releas- ing a study two months later he had worked on for about four years. That analysis, he said, shows that Medicare patients with the most severe injuries and ailments — a group that accounts for nearly 60 percent of LTCH patients nationwide — have better outcomes at long-term care hospitals compared to skilled-nursing facilities and other competing providers. For example, hospital readmission rates are 15 percentage points lower for the sickest patients who go to a LTCH vs. a skilled-nursing home, according to the study. The average amount of time it takes for a patient to be readmitted to a regular hospital is also longer for LTCH patients, and their emergency room use is also less frequent, the report concluded. The takeaway, said Kyriacou, is that LTCHs, while more costly, cannot be fairly compared to skilled nursing, and are saving the healthcare system money over time. How does it all net out? He said that's something that needs further study. Kyriacou began work on his study because he said the long-term care hospital industry had not done a good job proving its worth to regulators and policymakers. "The reason LTCHs have declined across the country is because, as an industry, we did a terrible job in being able to present concrete information," he said. Lynn Ricci, CEO at Hospital for Spe- cial Care, spent more than 20 years in nursing-home management. She said those facilities have become increas- ingly skilled in the level of care they can provide, but not so much that they could replace what LTCHs offer. "They have skilled up to meet some of the needs of the population, but they will never have 24/7 physician coverage," Ricci said. Amy Finekelstein, an MIT econom- ics professor and co-author of the NBER study, admits that her group did not measure every possible benefit of LTCHs, and noted that the paper stated the appropriate caveats. She and her colleagues plan to con- tinue their analysis of LTCHs, but she contends that the onus should be on the long-term care facilities to prove their value. A cresting wave Long-term care hospitals have issues beyond just an attack by economists. Congress and Medicare have tried to rein in LTCH costs a number of times since the 1990s, altering payment schemes and even enacting a morato- rium on new facilities. One of the more recent changes — which narrowed the criteria that make a patient eligible for LTCH reimbursement — had a big impact on industry profit margins. Since that change started to take effect in 2016, more than 40 LTCHs have closed their doors. There are currently about 400 still in existence. Medicare overseers are also weigh- ing LTCHs' future role in the health- care system, with recommendations due to Congress in June. Besides traditional Medicare, Medicare Advantage plans are of equal concern. Both Gaylord and Hospital for Special Care say private insurers that operate those policies, which are private-run alternatives to traditional Medicare, of- ten offering dental and vision coverage as well as other perks, are increasingly denying patient transfers from an area hospital to one of their facilities. LTCHs and patients often appeal those pre-authorization denials, which requires more staff resources and can take a few days. While some appeals are successful, the net impact is a loss of some inpatient volume. "It's definitely hurt," said Kyriacou. Because Medicare Advantage is growing steadily, the hospitals say pa- tient denials will likely only accelerate. "I do think the trend we're seeing in Medicare Advantage is one of our primary financial concerns going for- ward," LaBarbera said. "That product is just increasing every year, and is going to continue to increase," Ricci echoed. "We as an industry know we have to learn how to manage that, it's not going away." CT's long-term acute-care hospitals* Gaylord Specialty Healthcare Hospital for Special Care Beds 137 228 Inpatients per year 1,500 800 Net patient revenue $79,079,376 $99,132,253 Operating income $1,716,350 -($3,943,764) Operating margin 2.1% -(3.8%) Dominant payer Medicare (50%) Medicaid (75%) *All financial data is from 2018 Source: Hospital audited financial statements Hedging against risk W ith headwinds blow- ing, Gaylord Specialty Healthcare and Hos- pital for Special Care have each been bobbing and weaving stra- tegically, ramping up outpatient and other non-long- term hos- pital care services to diversify their reve- nue streams and spread risk. Gaylord's outpatient revenue has grown from 10 percent of its total revenue to 15 percent over the past five years, and it's invested heavily in the latest rehab equipment. "The outpatient services have grown significantly," said Gay- lord CEO Sonja LaBarbera. Meanwhile, Hospital for Spe- cial Care continues to expand its autism inpatient unit with the help of a recent $10 million state grant. It also cares for most ALS patients in Connecticut, and uniquely for an LTCH, derives the majority of its revenue from Medicaid, not Medicare. "I would argue that we're clear- ly different," Hospital for Special Care CEO Lynn Ricci said. — Matt Pilon Lynn Ricci, CEO, Hospital for Special Care (Top photo) Gaylord Specialty Healthcare therapists Heidi Fagan (left) and Stephanie Zanvettor (right) assist patient Robert White, who is using a balance-support system to walk. (Bottom photo) Gaylord CEO Sonja LaBarbera.

• Cover