September 2005 - Hospitals to Comply with New CMS Payment Policy When Transferring Patients: Effective for Discharges on or after October 1, 2005, Metropolitan Hospitals Most Impacted
The Centers for Medicare and Medicaid Services (CMS) issued a new rule in August that revises the Medicare inpatient prospective payment system (IPPS) criteria used to determine if a diagnosis related group (DRG)* qualifies for inclusion in the post-acute care transfer payment policy. Effective for discharges on or after October 1, 2005, this rule expands the application of the post-acute care transfer payment policy from 29 DRGs to 182 DRGs. Urban area hospitals are more likely to be impacted by the revised payment policy due to the higher concentration of post-acute care facilities in those areas.
According to Ken Blickenstaff, Principal of BlickenWolf LLC, an investigative and integrity services firm, “The revised policy directly impacts how payments to hospitals are made, whether a per diem amount or the DRG amount. Hospitals should be aware of this revised rule to assure compliance with the expanded DRGs and avoid violations of federal law.”
The purpose of the revised policy is to avoid providing an incentive for a hospital to discharge a patient to another hospital, a skilled nursing facility, or home health in some instances in order to minimize costs while still receiving the full DRG payment.
When transferring a patient, full payment is made to the final discharging hospital and each transferring hospital is paid a graduated per diem rate for each day of the patient’s stay, not to exceed the full DRG payment that would have been made if the patient had been discharged without being transferred.
CMS expects the transfer payment policy to result in a .9% decrease in overall Medicare payments to hospitals with an estimated cost savings to the Medicare program of approximately $780 million for fiscal year 2006.
* Diagnosis-related groups (DRGs) is a classification of hospital case types into groups expected to have similar hospital resource use. Medicare uses this classification to pay for inpatient hospital care. The groupings are based on diagnoses, procedures, age, sex, and the presence of complications or comorbidities.
