Home Health & Hospice Week

List of prorated DRGs jumped from 30 to 182 on Oct. 1.

Your local hospital may reduce your referrals to a trickle, thanks to a major change to the facilities' inpatient prospective payment system.

In May, the Centers for Medicare & Medicaid Services proposed increasing the number of diagnosis-related group payments that are reduced when patients are discharged to post-acute settings, including home care. While in previous years the number of prorated DRGs increased modestly from 10 to 30, CMS proposed to expand the policy to a whopping 231 DRGs starting Oct. 1 (see Eli's HCW, Vol. XIV, No. 22).

In response to vociferous opposition, mainly from hospitals, CMS pared that number to 182 DRGs in its final hospital IPPS rule published in the Aug. 12 Federal Register. "The purpose of this policy is to protect Medicare from paying for the same care twice: once as part of the hospital's payment for the DRG, and then as a separate payment to the post-acute facility," CMS says in a release.

"We are taking this step because in many cases of incomplete hospital stays when patients are transferred, it is not appropriate to pay for a full hospital stay," CMS Administrator Mark McClellan says in the release.

Hospitals are furious with the development. "Neither patient nor provider are well-served when a hospital is penalized for working to ensure that a patient receives efficient care in the right place ... and in the most appropriate setting," blasts the Illinois Hospital Association in a message to members.

True story: But home health agencies may feel the effects of the provision most keenly. One Oklahoma HHA tells Eli that the local hospital is telling physicians not to discharge patients to home care "because the hospital has to split the DRG with home health."

As a result, a cardiovascular surgeon referral source who formerly referred patients to the agency "quite often" has now stopped referring patients altogether, the HHA reports.

Some Home Care Association of New York State members "are concerned about their hospital referrals going forward because of this issue," reports the association's Pat Conole. "In one or two cases the hospital mentioned it to them," he notes.

The newly expanded policy "will have an adverse effect on HHA referrals," warns Gene Tischer with Associated Home Health Industries of Florida. "Many more patients will be staying longer in hospitals and therefore needing less home care," he predicts.

Beware Hospitals With Extra Beds

Many HHAs didn't see much impact from the old policy, notes consultant Betty Gordon with Simi-one Consultants in Hamden, CT. That could be be-cause the patients weren't discharged early enough to trigger the proration or because hospitals hadn't taken the time to notice a billing rule that affected such a small percentage of patients.

But some agencies did see an impact, even under the limited number of DRGs included before. Some Kentucky HHAs experienced problems when the first post-acute transfer policy took effect, notes Karen Hinkle with the Kentucky Home Health Association.

Besides an effect on referrals, hospital discharge planners wanted HHAs to tell them whenever the agency admitted a patient who had recently been in the hospital, Hinkle says. "But that finally leveled off."

Now that the transfer policy applies to 182 DRGs, hospitals that may have overlooked the rule before are sitting up and taking notice--and telling their physicians not to refer their discharged patients to home care any more.

Hospitals that have a surplus of beds may be especially tempted to keep patients in the hospital longer to avoid the DRG proration, notes regulatory consultant Rebecca Friedman Zuber in Chicago.

Watch out: And you shouldn't breathe a sigh of relief if you haven't heard anything out of your referring hospitals, and their physicians, yet. "Because the hospitals' billing cycles tend to be longer ... they aren't really beginning to feel the pinch yet," Zuber notes. Once they add up the prorations, they may clamp down hard on post-hospital referrals to home care.

Silver Lining For HHAs?

Not all hospitals will have a knee-jerk reaction to the newly expanded policy, Zuber predicts. "Smart hospitals with integrated systems will compare the DRG loss with the potential home health, rehab or [long-term care] setting reimbursement, will also compare the costs and will develop a response based on that analysis," she expects.

Even if hospitals are tempted to keep patients longer because they have available beds, they may not want to maintain the staff for the beds in light of the nursing shortage, Zuber offers. The competition for other professional staff may also nix that strategy.

National LOS counts: Many hospitals may not find themselves affected by the new policy because they don't discharge patients early enough to trigger the proration, Gordon notes. Hospitals' lengths of stay for patients must be shorter than the national average for proration to kick in.

Hospitals and physicians also may steer clear of prohibiting home care and other post-acute referrals due to quality of care issues.

"Referral to the appropriate post-acute situation, whether that is a [skilled nursing facility] or skilled care at home, is considered a 'standard of care,'" insists consultant Lynn Yetman with Reingruber & Co. in St. Petersburg, FL. "Hospitals and physicians should be aware that they are wide open to accusations of malpractice if they don't refer patients to the most appropriate setting for post-acute care."

The change could even end up helping HHAs, Zuber forecasts. Agencies "may just get the patients a day or two later" because the hospitals wait out the proration period for the DRG, she says. That means the HHA could receive "potentially the same PPS payment" for a patient who needs one or two fewer visits. That could translate into savings for agencies. 

Note: For a copy of the post-acute transfer policy included in the IPPS final rule, email editor Rebecca Johnson at rebeccaj@eliresearch.com with "Transfer Policy" in the subject line.