Home Health & Hospice Week

CMS proposes reducing hospitals' DRG payments when patients go to home care. Your job of securing hospital referrals may get even more challenging this fall if a hospital payment proposal flies.

The Centers for Medicare & Medicaid Services wants to expand hospitals' post-acute transfer policy in a big way. That's the policy that pays hospitals a per diem amount, rather than the whole diagnosis related group (DRG) payment, if a patient receives home care services within three days of hospital discharge. The rule aims to keep hospitals from discharging patients too quickly and pocketing the profits.

Currently, the post-acute transfer policy applies to 30 DRGs. But in the fiscal year 2006 hospital inpatient PPS proposed rule, CMS says it wants to adjust the transfer policy criteria and increase the 30 DRGs affected to 223. The other 284 active DRGs either have very short lengths of stay anyway or have very few short-stay cases, CMS says in the proposed rule in the May 4 Federal Register.

And to add to hospitals' discharge worries, CMS told the HHS Office of Inspector General in an April report that it would monitor hospitals with a high number of claims adjusted due to early post-acute discharge. The OIG found that in 2001 and 2002, 381 of 400 claims sampled did not comply with transfer policy coding, and CMS has put in place automatic edits to catch the errors.

The drastic expansion of the DRGs subject to the post-acute transfer policy could have a big impact on home care providers and hospitals, predicts consultant Tom Boyd with Rohnert Park, CA-based Boyd & Nicholas. Hospital discharge planners may keep a closer eye on patients and check back to confirm that the patients have not sought post-acute care, Boyd says.

The trend of hospitals shedding their home health agencies may end too, if hospitals want to continue to discharge patients early but keep reimbursement in-house by directing patients to the hospital's own HHA, Boyd forecasts. Hospitals Fighting the Expansion Experts hope the effects from any possible DRG expansion remain limited. Many of the 223 DRGs wouldn't apply to patients who are appropriate for home care anyway, points out Alex Cacas with Peterschmidt & Associates in Albuquerque, NM.

Here's how it works: The way the post-acute transfer policy works may make an early discharge worth the price, especially for lucrative hip and knee replacement patients. For the affected DRGs, CMS divides the total payment for the DRG 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 [...]