Expanding the types of conditions for which hospital patients can be discharged early to post-acute care, forgoing full prospective payment, could save the Medicare system millions of dollars annually, a federal audit has found.
The Health and Human Services Office of Inspector General on Wednesday publicly released its Oct. 5 findings and a recommendation that the Centers for Medicare & Medicaid Services conduct a new analysis of its hospital transfer payment policy for discharges to post-acute care and expand it “as necessary.”
CMS pays hospitals a per-diem transfer fee if they discharge certain patients to a nursing home or other post-acute setting ahead of Medicare’s expected end of stay. The policy is intended to discourage hospitals from keeping patients in an acute setting longer than necessary to receive full payment. It was applied to patients with about one-third of all hospital diagnoses codes in 2019.
But in its audit of 100 random claims from 2017 to 2019, the OIG assumed that patients with all diagnoses could be transferred early and payments shaved down accordingly. The audit found 99 reduced payments at the per-diem transfer rate rather than for a full stay would have netted Medicare a savings of just over $1 million.
“On the basis of our sample results, we estimated that Medicare could have saved approximately $694 million, or an average of $6,407 per claim, from 2017 through 2019 if it had expanded its hospital transfer policy to include all MS-DRGs,” the report stated.
The audit also found that even when receiving less pay overall, hospitals would still have most of their costs covered under an expanded transfer payment policy.
Reducing Medicare spend is impetus
The OIG said it tackled this research as part of its broader efforts to shore up the Medicare Trust Fund, which has a projected deficit of $7.3 billion by 2028.
“One reform CMS could implement to help partly alleviate this deficit would be to expand its hospital transfer policy for discharges to PAC to include all MS-DRGs,” the OIG reported. “Implementing such a policy would result in immediate and significant Medicare savings. A revised policy could also promote greater payment equity among hospitals, as stated in CMS’s rulemaking.”
The hospital transfer policy was established in 1998 and covers transfers made to skilled nursing facilities, inpatient rehabilitation facilities, long-term care hospitals, inpatient psychiatric hospitals, home care and hospice care. Hospital-to-post-acute transfer payments were originally applicable to 10 diagnoses with high-volume discharges to post-acute care, and CMS had expanded the policy to 280 codes by fiscal 2019.
But since 2005, CMS has not made any significant changes to the criteria for determining which MS-DRGs qualify for the transfer payments. OIG said the agency should approach a policy revamp by starting with a fresh analysis of codes that could be eligible.
In her response to the OIG, CMS Administrator Chiquita Brooks-LaSure said her agency would examine its policy again after it has collected enough fresh data after the end of the COVID-19 Public Health Emergency. She reiterated that the CMS policy in implementing the payments has been to limit the hospital post-acute care transfer policy to MS-DRGs with a “high volume” of post-acute discharges.
She also broached the issue of access if some payments were to shift away from hospitals.
“CMS notes that any further expansion of the post-acute care transfer policy would also need to consider other factors, such as the need to reduce payments to reflect cost-shifting out of the acute-care setting due to reductions in length of stay attributable to early transfers to post-acute care and the need to ensure that payments, on average, remain adequate to ensure effective patient care, particularly in rural and underserved areas,” she wrote.
