Home Health & Hospice Week

Make transfer lemons into lemonade.

If you let the newest changes to the DRG transfer policy pass you by, you'll be missing out on a prime chance to market your home health agency.

Starting in fiscal year 1999, the Centers for Medicare & Medicaid Services began reducing payments for certain patients' hospital stays if they were discharged to post-acute settings such as home care too early, CMS explains in its inpatient prospective payment system rule in the May 18 Federal Register.

The reductions started out in only 10 diagnosis-related groups, but expanded to 29 DRGs in October 2003 (see Eli's HCW, Vol. XII, No. 28). Now CMS proposes to add another DRG to the list, and to swap a general DRG out for two more specific ones -- bringing the total of DRGs subject to reductions to 31.

Here's how it works: For the affected DRGs (see "Proposed DRGS Subject To Post-Acute Transfer Policy"), CMS takes the total payment for the DRG and divides it by the mean length of stay to arrive at a per diem payment rate. When hospitals discharge patients early to an HHA, skilled nursing facility or another hospital, they get paid the per diem rate instead of the full DRG amount. However, hospitals receive twice the per diem rate for the first day to make up for initial costs.

For three DRGs only, hospitals receive a whole 50 percent of the DRG payment plus the single per diem for the first day -- hip and knee procedure DRGs 209, 210 and 211. These DRGs "exhibit a disproportionate share of costs very early in the hospital stay in postacute care transfer situations," CMS explains in the reg.

The proration kicks in only when the transfer occurs within three days of the hospital discharge and when "the services relate to the condition or diagnosis for which the individual received inpatient hospital services," CMS explains in the proposed rule.

Most HHAs are unaware of the DRG policy, suspects Gene Tischer with the Associated Home Health Industries of Florida. And those who do know about the policy often think it discourages home care referrals because hospitals don't want the reduction to their DRG payments. "There is always knee jerk reaction to any changes that will lessen payment from a prorated DRG," Mike Ferris of Home Care Marketing Solutions in Chapel Hill, NC says of hospitals.

But ignoring the DRG post-acute transfer policy won't make it go away, and agencies can capitalize on this payment policy, Ferris suggests. The newly proposed transfer DRGs represent "a golden opportunity to make this potential problem into a strong relationship." But it "will take serious education to ensure hospitals don't see this as an imposition of home care on their turf," points out Pam Warmack with Clinic Connections in Ruston, LA.

HHAs should first figure out how referring hospitals are handling the DRG situation, Ferris tells Eli. For example, "if the management of the hospital is known to come down hard on the case managers when later they find that they have received less Medicare payment than expected, then the HHAcan really help that CM out," Ferris explains. Letting case managers know about the affected DRGs means they may send the home care case to you, not your competitor, a few days later when the DRG payment is full.

Agencies that have a hard time getting in touch with discharge planners or case managers can use the DRG rule change to gain some valuable face time, Ferris suggests. Or sending the information in written materials puts your agency's name in front of the hospital referral sources and can "provide the HHA with the edge." If you regularly include pertinent information such as the DRG proposal, hospitals will be sure to open your mail (and remember your name), Ferris contends. "Bringing the latest info on Medicare as it affects the referral source is a great marketing philosophy," he says.

If you are a hospital-based HHA, you can argue to the hospital that it might be worth the early discharge if the home care payments are going to an organization still within the health system, Ferris recommends. "Hospital-based agencies always need to be on the lookout for any way to strengthen their relationships both internally as well as with other hospitals," he says.

Pointing out that hospitals receive the majority of hip and knee patients' payment up front may be a good way to secure referrals of these lucrative patients who often need therapy. "This is an excellent opportunity to build better relationships with the case managers and discharge planners," Ferris maintains. "Any time an HHA can help to make their lives easier, they should seize the opportunity."

Editor's Note: The hospital inpatient PPS rule, including an explanation of the post-acute transfer policy, is in the May 18 Federal Register, pp. 28271-28274, at www.access.gpo.gov/su_docs/fedreg/a040518c.html.