Medicare Compliance & Reimbursement

CMS proposes reducing DRG payments for patients who go to home care.

Home health agencies trying to secure hospital referrals may have even more challenges this fall if a hospital payment proposal flies.

The Centers for Medicare and 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 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 will 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.