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Nursing Homes Have Larger Reach Than Rehab Hospitals

Rehabilitation hospitals and skilled nursing homes at odds over whether their Medicare payments should be the same have different industry profiles.

Skilled nursing homes are found in far more congressional districts than inpatient rehabilitation hospitals. In 2012, almost 15,000 skilled nursing homes provided care, including rehab therapy, to 1.7 million Medicare beneficiaries, according to the Medicare Payment Advisory Commission.

Spending on skilled nursing-home care through the traditional Medicare program was about $28.7 billion in 2012.

The rehab hospital industry is smaller and more specialized. In 2012, 1,166 inpatient rehab facilities treated more than 373,000 cases among seniors in the traditional fee-for-service Medicare program. Medicare spending at rehab hospitals was about $6.72 billion in 2012, less than a quarter of the total spent at nursing homes.

But the payments to individual rehabilitation providers often are higher than to skilled nursing homes. For a few conditions, such as therapy after hip fractures, the Medicare payments are already similar. But for conditions such as therapy after total hip replacements, the Medicare payments were 47 percent higher for inpatient rehab hospitals, MedPAC said. For rehab after knee replacements, Medicare paid 49 percent more to rehabilitation hospitals, according to MedPAC.

The Obama administration proposed that inpatient rehab hospitals’ payments should be adjusted for conditions involving hips and knees, pulmonary conditions and any other conditions selected by the Department of Health and Human Services.

The administration estimates this plan would save $110 million in Medicare payments over one year and $1.6 billion over a decade. That’s a relatively small amount, given the overall cost of the Medicare program, but as lawmakers worry about federal health care spending, they are considering any policy changes that would lower costs.

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