Shorter behavioral stays save Medicaid money, but frustrate hospitals

The shift toward value-based payment in healthcare that countless advocates say will cut costs and improve the quality of care isn't without its downsides. This week's earnings show the evolution is weighing on some providers' bottom lines.

As more of Universal Health Services' behavioral health patients move from fee-for-service Medicaid to Medicaid managed-care programs, the for-profit hospital chain has watched its lengths of stay decline, a trend the company's chief financial officer said it's pushing back on. In UHS' second-quarter earnings report last week, it revealed the average length of stay among its behavioral health patients declined 2.3% on average compared with the same quarter in 2017, and patient days declined 1.2%.

Steve Filton, CFO of the King of Prussia, Pa.-based company, said managed-care providers tend to be more aggressive in their utilization reviews, and his providers worry their patients could be discharged too early, potentially posing a danger to themselves or others.

"Sometimes we believe that really aggressive utilization review can be sort of penny-wise and pound-foolish," he said.

Filton said UHS is working to reverse the trend by providing more documentation from its clinicians to justify the stays, including medical record reviews and perspectives on patients' conditions.

Research has shown managed-care patients tend to have shorter hospitalizations as providers better coordinate their care and strive to lower their overall costs. Medicaid managed-care patients had 7% shorter lengths of stay and 1.9% lower inpatient costs than Medicaid fee-for-service patients between 2006 and 2012, according to a 2015 study in the journal Inquiry.

Four years ago, roughly half of UHS' Medicaid patients were in managed-care plans. Today, it's about two-thirds, Filton said. UHS—the country's largest facility-based behavioral health provider, with 301 behavioral health hospitals and more than 22,000 beds—has observed that compared with fee-for-service Medicaid, managed-care Medicaid providers tend to both approve shorter stays when patients are admitted and retroactively deny more hospitalizations they determine weren't necessary after the fact. For the past two years, that has manifested in declining lengths of stay on UHS' behavioral health side, Filton said.

Filton said another potential side effect of shorter lengths of stay could be higher readmission rates. Medicaid managed-care advocates disagreed on that point.

Alex Shekhdar, vice president of federal and state policy with Medicaid Health Plans of America, the trade association representing the managed Medicaid industry, said managed-care providers receive a capitated payment for a patient's total cost of care, so they're "fully at risk" for the readmission costs.

"We're not incentivized to do something harmful for the patient," he said. "We're trying to seek out the most appropriate site of care that's in keeping with therapeutic protocols."

Managed-care providers are focused on seeking out alternative sites of care in communities beyond hospitals, whereas hospitals naturally have an incentive for admissions, Shekhdar said.

"A lot of different areas and spheres like the opiate crisis, they're not amenable to just the traditional model," he said. "You've got to kind of come up with something new. I think that's where the managed-care plans are better situated because we can draw from and marshal different resources from across different providers."

Shorter lengths of stay shouldn't result in higher readmission rates because patients will be better engaged with their healthcare providers, said Elizabeth Lagone, vice president of government programs at CipherHealth, a technology company that helps health systems and managed-care providers with patient care management.

As their label implies, managed-care providers typically engage in much more care management than their fee-for-service peers.

Lagone, who has helped implement Medicaid managed care in New York, said the move toward managed care is a welcome trend.

"Healthcare is so complicated because there are people coming at it from different angles and different ultimate objectives," she said. "The patient and patient outcomes should always be at the center point."

Acadia Healthcare, another for-profit behavioral health provider that operates 585 facilities with about 17,900 beds in the U.S. and the U.K., reported Monday that its average length of stay declined 3.8% in the second quarter, which ended June 30. But Acadia CEO Joey Jacobs told investors on the Franklin, Tenn.-based company's earnings call Tuesday that Medicaid managed care wasn't to blame.

On the contrary, Jacobs characterized the company's length of stay as "very stable" over the past several years, and said it was shorter in the second quarter due to a higher proportion of acute-care patients relative to residential and specialty patients, which tend to stay longer.

"It's a mix issue that's just driving that math," he said.