Long-Term Care Hospitals: A Case Study in Waste

There is substantial waste in U.S. healthcare but little consensus on how to combat it. We identify one source of waste: long-term care hospitals (LTCHs). Using the entry of LTCHs into hospital markets in an event study design, we find that most LTCH patients would have counterfactually received care at Skilled Nursing Facilities-facilities that provide medically similar care but are paid significantly less-and that substitution to LTCHs leaves patients unaffected or worse off on all dimensions we can objectively measure. Our results imply Medicare could save about $4.6 billion per year by not allowing discharge to LTCHs.

Automated summary

There is substantial waste in U.S. healthcare with a lack of consensus on how to address it. Research reveals that long-term care hospitals (LTCHs) contribute to this waste. By analyzing the entry of LTCHs into hospital markets, it is found that most patients who are admitted to LTCHs could have received similar care at Skilled Nursing Facilities at a lower cost. The study suggests that Medicare could save around $4.6 billion annually by restricting discharges to LTCHs.