The OIG recently issued a report (A-01-12-00507) concerning the potential financial impact to Medicare Part A if CMS established a hospital transfer payment policy for early discharges to hospice care.  The OIG explained that it undertook this review because in recent years the number of discharges from acute care hospitals to hospice care has “increased significantly.”  According to the OIG, payments to acute care hospitals for services provided to beneficiaries discharged to hospice care increased from $1.5 billion in CY 2007 to $2.7 billion in CY 2010, which equates to an 80 percent increase.

Medicare currently maintains two “transfer payment policies” that adjust hospital payments for services provided to beneficiaries who are discharged before the Medicare-established average length of stay (an early discharge) to other acute care hospitals or certain post-acute care facilities, including skilled nursing facilities, inpatient rehabilitation facilities, home health agencies, long-term care hospitals and psychiatric hospitals.  If a transfer payment policy applies, a hospital receives per diem payments rather than the full DRG payment.  According to the OIG, “[t]his is based on the assumption that hospitals should not receive full payments for beneficiaries discharged early and then admitted for additional care in other clinical settings.”

Under current Medicare policy, an acute care hospital’s payment is not decreased if a beneficiary is discharged early to hospice care.  The OIG estimates that, for CYs 2009 and 2010, approximately 30 percent of all hospital discharges to hospice care were early discharges.  If a transfer payment policy had been in place in CYs 2009 and 2010, the OIG estimates that the Medicare program could have saved $602,519,187.  The OIG notes, however, that its savings estimation is based on the assumption that all DRGs would be included in the hospital-to-hospice transfer payment policy, but if only certain DRGs were included in a transfer policy, the savings to the Medicare program would have been less.  The OIG further concludes that a hospital transfer payment policy for early discharges to hospice care would not “cause a significant financial effect on hospitals” because generally per diem payments would exceed hospital costs.   Thus, the OIG recommends that CMS establish a hospital transfer payment policy for early discharges to hospice care.  CMS is currently analyzing the OIG’s recommendations. 

To view the report, click here. 

Reporter, Stephanie F. Johnson, Atlanta, +1 404 572 4629, sfjohnson@kslaw.com.