How Acute Hospital Care at Home Models Bring Value to Hospitals and Patients

A Guidehouse analysis finds hospitals could generate nearly $4 million in annual value by providing improved care experiences through acute hospital at home models.

On July 15, 2022, the extension of the public health emergency again extended the Centers for Medicare & Medicaid Services (CMS) Acute Hospital Care at Home waiver program another 90 days, offering payment and regulatory flexibility for hospitals to manage capacity while maintaining or improving the quality of patient care. To date, CMS has approved Acute Hospital Care at Home waivers for 242 hospitals across 36 states. Under the waiver program, health systems have an opportunity to divert eligible patients into a home setting, thereby improving inpatient capacity, access to care for more patients, and the care experience.

Acute hospital at home models have been shown to lower the cost of care by approximately 30%. Cost savings are achieved by reducing excess inpatient days, decreasing the volume of clinical testing and consultations, and cutting overhead costs. Additionally, these models have been proven to advance quality by lowering readmission rates and incidences of hospital-acquired infection and improving patient satisfaction.

Based on the above operational and quality metrics, Guidehouse analyzed Medicare claims data for hospitals across the country to project the financial impact of implementing the CMS Acute Hospital Care at Home program—including savings and revenue opportunity.

The average hospital can save approximately $3,000 per encounter by caring for an eligible patient at home. 

Specifically, the analysis showed an average of nearly $4 million in annual opportunities, across three areas:

  1. Clinical appropriateness: Given CMS Acute Hospital Care at Home requirements related to level of care and physical care environment, the analysis assumes 50% of low-complexity cases and 10% of high-complexity cases may be home eligible, based on a subset of DRGs commonly addressed through these programs.
  2. Cost savings: An average cost savings of 30% per encounter was applied to all Acute Hospital Care at Home eligible encounters, showing approximately $3,000 in savings per encounter or more than $1 million in savings per hospital by providing higher-quality, more efficient care.
  3. Backfill access and revenue: The revenue opportunity by increasing access to care, assuming 100% of inpatient capacity is backfilled, is nearly double the cost savings potential. Guidehouse conservatively estimated average revenue per additional inpatient admission as $10,000. However, some hospitals will realize even greater financial opportunity if newly available beds are filled with higher acuity patients. 

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Inpatient capacity management and patient throughput are key factors for pursuing the CMS waiver.

Hospitals that have been approved for the waiver are more likely to have a higher number of Acute Hospital Care at Home-eligible encounters compared to hospitals that have not yet received the waiver.

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The average length of stay for Medicare admissions is also higher for hospitals that have been approved for the Acute Hospital Care at Home waiver, compared to all other hospitals. Waiver-approved hospitals with more than 750 projected Acute Hospital Care at Home-eligible encounters have an average length of stay that is 8% higher than peer non-waiver hospitals.

Hospitals are facing workforce challenges and network leakage while grappling with patient throughput and length of stay.

The COVID-19 pandemic may have been a driving force behind initial adoption of acute hospital at home models, but they provide an innovative approach to solve for many of today’s financial, operational, and clinical challenges. In fact, a survey of more than 130 CEOs found that hospitals are growing their business lines to provide approximately 20% more services outside of the hospital and/or in the home than in 2021.

However, the level of program implementation varies widely. Some hospitals have their programs up and running, while others have struggled to launch or ramp-up volume.

When leaders at Palomar Health, the most comprehensive healthcare delivery system in northern San Diego County, and a member of the Mayo Clinic Care Network, needed to offer more capacity due to COVID-19 pandemic surges, they engaged Guidehouse to help them achieve CMS Acute Hospital Care at Home waiver approval, as well as build their program in-house via an enterprisewide redesign initiative.

While Palomar Health was granted CMS Acute Hospital Care at Home waiver approval in just three months, they also worked to redesign their clinical operations strategy to meet the needs of the new model. Key initiatives included aligning acute and ambulatory workflows and integrating them into their EHR. The investment in an innovative and highly technological model has also positioned Palomar Health to mitigate risk and enhance patient safety. Success means that the health system’s goals will have a long-lasting impact on the communities it serves while strengthening its market position.

It is critical for leading organizations to consider hospital at home care.

There is growing momentum for CMS to allow all waiver-approved hospitals to continue with the program as a pilot for two years once the public health emergency ends.

Leaders should consider the following questions when evaluating whether to engage in care at home strategies:

  • Is our hospital currently facing length of stay, readmissions, and patient throughput challenges?
  • Do we have additional patient cases that we cannot manage today, secondary to capacity issues?
  • Is there a physician champion who will support and drive this work?
  • Are we moving toward value-based care in which a reduction of the total cost of care is critical in the success of our clinically integrated network?

To learn more about acute care at home programs and project your hospital’s financial impact, contact us.

Nicole Fetter, Lauren Murski, Susie Smith, Donna Cameron

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