View: Two ways to keep a lid on Medicare cost increases

(Bloomberg View) — Medicare costs are rising a bit faster than they have during the past few years.  But by reinforcing some the changes that are already occurring, we can nip this increase in the bud — and two developments show the way.

First, hospitals are starting to more aggressively screen skilled nursing and other facilities that treat discharged patients. Second, the Medicare actuaries now have acknowledged the evidence that it’s possible to reduce spending by changing the form of payment, and not just by making blunt cost cuts.

Policy makers and insurance companies have been trying to pay health providers based on the quality of care rather than how much care they provide. One example is the use of so-called accountable care organizations, which give hospitals and other providers the financial incentive and responsibility to orchestrate comprehensive treatment for patients.

Hospitals do seem to be looking in some of the right places to cut wasteful spending. An Institute of Medicine analysis in 2013 showed that spending on outpatient care is the primary reason that Medicare costs vary so much from place to place. And a more recent analysis suggested that excessive spending after a patient was discharged actually did harm. Those facilities that spent more on outpatients had worse results, including higher mortality rates, than lower-cost facilities. Skilled nursing facilities — where about a fifth of Medicare patients go after leaving the hospital — were the biggest offenders.

These findings suggest a lot of unnecessary spending can be cut after a patient leaves the hospital and have a positive effect on care quality.