Breaking hospital discharge gridlock through policy reforms

The first two articles in this series described how hospitalists increasingly face gridlock when discharging patients from the hospital, particularly when post-acute care is needed.1, 2 While hospital- and health system-level interventions can help mitigate gridlock, these efforts face strong headwinds from broader policy and payment incentives that contribute to the bottleneck. In the final article of this series, we focus on policy solutions to one of the most common instances of gridlock experienced by hospitalists: difficulty discharging patients to skilled nursing facilities (SNFs; Figure 1). Policy solutions can be categorized as addressing hospital inflows and outflows of patients. In the first part of this article, we will focus on hospital outflows as they are often the most feasible to address. We describe policies that reduce administrative barriers, improve SNF bed availability, promote acceptance of clinically and socially complex patients at SNFs, and expand the availability of home care. In the second part, we discuss the need for fundamental change in the way we design, fund, and deliver home and community-based supports to older adults in the United States, which offers the most long-term promise for reducing gridlock. Administrative barriers make it difficult to traverse the chasm between hospital and SNF. Thankfully, these barriers are ripe policy targets. Abolishing the traditional Medicare (fee-for-service) 3-midnight rule for beneficiaries to qualify for SNF coverage would allow more flexibility for SNF discharges. In addition, enabling observation nights in the hospital to “count” toward the 3-midnights may be particularly important for older adults admitted to the hospital for placement, with few active medical issues requiring hospitalization. Failure to count observation days towards the 3-midnight requirement is one of the Office of Inspector General's Top 25 Unimplemented Recommendations, and waiver evidence from both the public health emergency and Medicare Accountable Care Organizations demonstrates eliminating the 3-midnight requirement is safe and facilitates timely discharges.3 Another administrative barrier lies in coverage denials during discharge planning. Medicare Advantage plans deny SNF coverage through prior authorization, subjecting hospitalists and patients to arduous and time-consuming appeals processes.4 This can be particularly galling since it is not clear that prior authorization achieves its intended goal: reducing unnecessary SNF use. CMS's Interoperability and Prior Authorization Final Rule requires three key improvements in the prior authorization process.5 Starting in 2026, prior authorization decisions must be made more quickly, require a specific standardized reason for denial, and denials with accompanying reasons must be publicly reported. Some may argue this rule does not go far enough, since Medicare Advantage plans are still allowed up to 72 h to issue a decision for expedited requests. However, improving the timeliness and transparency of prior authorization decisions by Medicare Advantage plans holds promise for expediting discharges, as well as understanding to what extent prior authorization decisions help or hinder high-value care delivery. The number of SNF beds has been slowly decreasing over time,6 driven by market factors such as reduced occupancy rates, reduced payments, and staffing difficulties. As a result, few operators are interested in the enormous capital expense of supplying more beds. However, better use of existing capacity holds promise, given reduced SNF occupancy rates. One strategy to increase the ability of nursing homes to accept more post-acute care patients (or use their existing bed capacity to accept more complex posthospital patients) is improving nurse staffing levels. In September 2023, CMS made national news in a proposed rule establishing higher minimum nurse staffing standards in nursing homes. Failure to meet these requirements would result in loss of CMS certification and subsequent ineligibility for Medicare and Medicaid payments. This rule places nurse staffing as a centerpiece of policy intended to improve nursing home capacity and quality. Of course, without competitive salaries, it will be difficult to attract new workers and most nursing homes already report being understaffed. Several states have increased Medicaid reimbursements for long-term nursing home care to help meet this mandate; a minority of states include “wage pass-through” laws to promote the passage of increased funding to direct care workers. The final rule—which received more than 46,000 public comments and is subject to several lawsuits from the nursing home industry—requires an additional half-hour of nurse staffing per resident day and a registered nurse onsite 24 h per day, 7 days per week. These changes could have meaningful consequences for SNF bed availability and gridlock. Hospitalists often view SNFs as a “safety net” for vulnerable patients who are unable to care for themselves at home,7 but SNFs may decline to accept patients with significant clinical or social complexity.8 This is particularly true in the context of recent value-based purchasing initiatives that financially penalize SNFs for hospital readmissions, impacting their bottom line and incentivizing admissions of lower-risk patients.9 In response, CMS has adjusted the SNF Value-Based Purchasing program to include a Health Equity Adjustment beginning in 2026. Under this adjustment, SNFs that care for at least 20% “dual-eligible” beneficiaries (adults who qualify for both Medicare and Medicaid and typically have more social risks and clinical comorbidities) will receive bonus incentives. This program may help counterbalance incentives to admit lower-risk patients and provide financial support to SNFs that serve safety-net functions. While it is too early to tell how the financial consequences of the Health Equity Adjustment will level out for SNFs, early projections for a similar program for hospitals suggest that these adjustments will lead to reallocations of funding to facilities that disproportionately serve structurally marginalized patients.10 Hospitalists may overuse SNFs as a post-discharge option,11-13 and many older adults are hospitalized simply because they can no longer be supported in the community. Expanding the availability of home and community-based services may both reduce hospital inflows and offer an alternative outflow after hospitalization. One model many hospitalist groups are experimenting with is acute hospital (or SNF) care at home, a policy waiver granted as part of the public health emergency (currently projected to end in December 2024 unless extended). Although these programs intend to expand the capacity to receive care in community-based settings, it is not clear whether they will meaningfully address hospital gridlock. These programs treat a highly selected population (less than 0.01% of traditional Medicare discharges annually), and it is unclear whether they deliver similar outcomes at comparable costs to hospitals.14 In addition, some have raised concerns about imposing additional burdens on unpaid caregivers.15 Formally incorporating caregivers into Medicare's postacute payment programs is an innovative, but rarely used, strategy for promoting home- and community-based care after hospital discharge.16 These programs could be integrated with existing Medicaid programs that allow beneficiaries to self-direct payments to family members for home-based long-term care, known as consumer-directed personal assistance programs. While home and community-based services are predominantly funded by Medicaid, Medicare-funded home and community-based services became possible with the passage of the Chronic Care Act of 2018. This legislation allowed Medicare Advantage plans to offer additional supplemental benefits to enrollees, including caregiver and in-home supports. The number of plans offering supplemental benefits has rapidly grown, and in 2024, more than 1400 Medicare Advantage plans offered caregiver or in-home supports. Medicare-sponsored value-based initiatives in traditional fee-for-service Medicare, such as bundled payment programs or other alternative payment models, could consider allocating funds to unpaid caregivers who help keep patients at home while saving health care systems enormous expense from facility-based post-acute care. Such policies could help alleviate some of the financial burden caregivers experience. In the end, the policy solutions above are trying to optimize care in a system that does not prioritize the complex needs of vulnerable and aging populations. The simple truth is that hospitalization is often a final common pathway that reflects societal failings and upstream structural determinants of health. If these factors are not acknowledged and addressed, we can expect worsening gridlock. Take the example of Japan, which went through a similar demographic shift as the Baby Boomer generation is undergoing currently, but 30 years earlier.17, 18 Before 2000, Japan had a long-term care system like ours: the expectation was for families to bear the cost of caregiving and individuals and families would “spend down” assets to pay for care. When the system reached the breaking point, Japanese families turned to the place that couldn't refuse older adults—the hospital. Before comprehensive long-term care reforms were enacted, older adults occupied half of all hospital beds and one-third had stays of longer than 1 year. Recent publications in the Journal of Hospital Medicine suggest we could be headed for a similar trajectory.19 Most hospitalists also recognize that the challenges of gridlock are often terminal manifestations of poverty, lack of economic opportunity, and unstable living environments for patients. Hospital gridlock is often a symptom of broader structural disadvantage for patients who may lack insurance or family supports that facilitate timely discharge. While health systems have begun to recognize their role (and their limitations) in addressing the structural determinants of health, hospitalists are uniquely positioned to advocate for more sustainable, effective, and broad societal reforms. We are perfectly positioned to tell the stories of our patients affected by gridlock. The Society of Hospital Medicine advocates for these types of changes (https://www.hospitalmedicine.org/policy--advocacy/current-issues/) through its Public Policy committee. Hospitalists interested in driving change are encouraged to participate in visits to Capitol Hill and engage with our advocacy efforts as an organization. Despite these formidable challenges, there is room for optimism when it comes to reducing gridlock. We have several available policy targets to improve the current system of care. But more broadly, adverse incentives and disorganized care delivery have led to a final common pathway of hospitalization for many adults we serve. Addressing these barriers will require bold, creative, and patient-centered ideas moving forward. The authors declare no conflict of interest.