Post-Acute Care Perspectives for Hospitals and Health Systems

Hospitals and health systems are increasingly focused on post-acute care (PAC) services and developing a strategy to better incorporate them into their clinical delivery models. The increased focus is driven by a number of factors including:

  • Americans are living longer, often with chronic and disabling conditions. By 2040, 1 in 5 Americans will be 65 or older, with more than one-third living with a disability.
  • The nature of illness is shifting away from acute episodes to chronic disease. This shift requires a model of care that extends outside of hospitals’ walls and leverages medical advances across nonhospital sites of care, leading to the formation of integrated delivery systems
  • The “specialization” of American medicine that has occurred over the past 60 years is being challenged to piece itself back together across provider types and sites of care. Integrated approaches enable healthcare professionals to treat patients holistically and collaboratively, improving care quality and outcomes.
  • There are broad changes in reimbursement models. New models—including financial penalties for readmissions, value-based payment and site-neutral payment—will continue to grow, incentivizing health systems to work more closely with post-acute providers who help ensure continuity of care and address complications that can reduce hospital admissions and emergency department (ED) use.

The Trends Driving PAC Preferred Provider Networks

Medicare reimbursement rates have been stagnant in recent years, placing significant pressure on PAC providers despite historically high Medicare margins. Medicare is focused on lowering overall PAC utilization by tightening requirements for providers to receive payments and using reimbursement policy changes to curb unnecessary utilization, as well as to rationalize care provided across settings.

Notably, the Medicaid Payment Advisory Commission (MedPAC) has issued a recommendation for a possible “unified payment system” for PAC that would establish single placement criteria and a common payment system for all sites of care. Though unlikely in the immediate term, the future of PAC payment will continue to shift toward risk-adjusted, site-neutral payments and tests of value-based payment models, including acute-post-acute care bundles.

A major result of these trends has been the formation of PAC “preferred provider networks” by hospitals and health systems. While some organizations are strategically looking to buy or build PAC services as part of their owned network of services, more are instead looking to integrate with PAC by creating networks of preferred providers that collaborate to optimize patient care across settings. A recent Premier survey of executives from 82 hospitals and health systems found that 95% of all respondents indicated that the development of high-value PAC networks to support population health was cited as a key area of focus over the next three years.

The formation of PAC preferred provider networks is complex, and requires a clear understanding of referral patterns to PAC providers, PAC financial and quality performance, PAC providers’ capacity and ability to serve patients from certain geographies, and varying levels of acuity. It also demands identifying the health system’s need for PAC services, as well as its knowledge of the legal and compliance risks associated with forming PAC networks. Thoughtful planning is essential to develop a robust network where the hospital and the PAC providers agree to a standardized set of policies and procedures that optimize patient care, both during the transition and after the patient is being serviced by the PAC provider.

Benefits of PAC Preferred Provider Networks

PAC preferred provider networks bring many benefits, both to the hospital and to the participating PAC provider:

1. Hospital Benefits

  • Immediate and consistent access to PAC services to appropriately and efficiently place patients in the right levels of care regardless of payer type
  • Increased hospital throughput
  • Greater efficiency in the discharge process
  • Ability to develop a care coordination infrastructure that seamlessly connects all providers along the care continuum
  • Reduction in readmissions/unnecessary ED visits
  • Brand and patient loyalty improvement

2. PAC Provider Benefits

  • Consistent and more predictable referral volumes
  • Better access to clinical support from the hospital to keep patients in the PAC facility rather than transferring them back to the hospital
  • Competitive differentiation
  • Preparation for new reimbursement models that bundle acute care and PAC together and/or include shared savings targets
  • Brand opportunities derived from network participation

3. Joint Benefits

  • Patient data sharing, as well as the integration of data among sites of care and an enhanced focus on analytics to improve patient care
  • The ability to jointly develop quality improvement initiatives to keep patients in the right levels of care
  • Shared protocols and clinical pathways to maximize the effectiveness of treatments and treat patients proactively rather than reactively
  • Consistent patient transfer protocols and processes
  • Continuous communication and collaborative patient management
  • Ability to individually and jointly market care services, using outcomes that measure care quality and patient experience
  • Preparation for success in population health and value-based payment initiatives


PAC providers play a critical role in ensuring patients receive the care they need to recover after a hospital discharge. As the population ages, chronic disease rates increase and new reimbursement models are introduced, a growing number of hospitals and health systems are seeking to integrate PAC providers into their care models—most often by creating collaborative preferred provider networks focused on optimal cross-setting patient care.