Executive Summary

Acute Care Involvement in Post Acute Care Using the Hybrid For/Non-Profit Model

The Merriman Good Life Foundation – Kevin McMahon

In a global sense acute care (AC) has enthusiastically embraced the goals imbedded in the triple aim (better care for individuals, better health for populations and lower overall health care costs).  The critical question is whether the goals of the triple aim still apply once a patient leaves the sanctuary of acute care and ventures into the world of Post Acute Care (PAC).

In terms of fiscal realities, poor performance in today’s world by post acute care can result in re-admission penalties borne entirely by acute care.  

In tomorrow’s world (2018, 2019) of capitation payments that combine AC and PAC reimbursement into a single episodic payment there will be significant risk to be shared between AC and PAC.  This scenario will cry out for acute care to have fully aligned post acute partners.

Acute care providers seeking to align their goals with post acute care have many options available to them. Numbering among them are the following:

  1. Acute care direct ownership and operation of PAC facilities
  2. Acute care partnerships with independently owned and operated PAC facilities
  3. A new AC/PAC paradigm utilizing the strongest features of the PAC industry as well as the for/non-profit hybrid nursing home structure.

1. Direct ownership and operation of PAC facilities by Acute Care:

This option is not optimal for many reasons including disinclination of acute care to spend capital dollars on non-mission critical endeavors, the absolute mismatch of scale and scope between AC and PAC, and the fact that PAC does not fit neatly into the structure of the “typical” hospital/health system.

2. Partnerships with independently owned and operated PAC facilities:

Due to some major disconnects between the goals and realities of acute care and post acute care any partnerships between these parties which  lack the legal/structural means to exact goal alignment will struggle to succeed.  

3. A new AC/PAC paradigm:

A hospital 501 (c) 3 serves as the sponsor of this model.  The hospital leases a nursing home beds/bricks/business from owner (individual, REIT, physicians).  The hospital engages a credible, efficient PAC entity to operate the facility for a fixed fee.  Tax exempt excess of revenues over expenses is used to improve care and services AND build a clinical enterprise that allows acute care to truly realize the triple aim for its patients in the post acute world.


  • No capital commitment on the part of acute care.  
  • Ability of AC to help to design the PAC clinical enterprise.  
  • Ability to affect outcomes in both AC and PAC.  
  • Non-profit hospital sponsorship maximizes dollars available for enhancing PAC care/services and improving the clinical enterprise.
  • Non-profit hospital sponsorship maximizes dollars available for leasehold improvements.

Other Considerations:

  • Plante Moran feasibility study shows solid cash flow and operating margins over five years for a typical 100-bed facility.
  • Possibility of creating synergistic opportunities with the hospital selling competitively priced services to the hybrid SNF (e.g. pharmacy).
  • Possibility of creating an investment opportunity for physicians (to serve as owners of beds/bricks/business).